8/18/2023 – Econ Update

August builder confidence drops 6 points to 50 as mortgages rates trend up

After steadily rising for seven consecutive months, builder confidence retreated in August by six points to 50 as rising mortgage rates nearing 7% (per Freddie Mac) and stubbornly high shelter inflation have further eroded housing affordability and put a damper on consumer demand. The HMI index gauging current sales conditions fell five points to 57, the component charting sales expectations in the next six months declined four points to 55 and the gauge measuring traffic of prospective buyers dropped six points to 34.


August survey shows more builders cutting sales prices and offering incentives

After dropping steadily for four months (from 31% in March to 22% in July), the share of builders cutting prices to bolster sales rose again to 25% in August. The average decline for builders reducing prices remained at 6%. The share of builders using incentives to bolster sales was 55% in August, higher than in July (52%) but still lower than in December 2022 (62%).


Building permits edge up 0.1 percent in July but down 13.0 percent year-on-year

Privately?owned housing units authorized by building permits in July were at a seasonally adjusted annual rate of 1,442,000, up 0.1 percent from June but down 13.0 percent year-on-year.  Single?family authorizations in July were at a rate of 930,000, up 0.6 percent from July and 1.3 percent year-on-year.  Authorizations of units in buildings with five units or more were at a rate of 464,000 in July, down 0.2 percent from June and 32.2 percent year-on-year.


Housing starts up 3.9 percent in July and 5.9 percent year-on-year

Privately?owned housing starts in July were at a seasonally adjusted annual rate of 1,452,000, up 3.9 percent from June and 5.9 percent year-on-year. Single?family housing starts in July were at a rate of 983,000, up 6.7 percent from June and 9.5 percent year-on-year. The July rate for units in buildings with five units or more was 460,000, flat from June and up 0.4 percent year-on-year.