U.S. homebuilder sentiment fell to a seven-month low as rising mortgage rates and high asking prices led to declining sales and prospective buyer traffic.
The National Association of Home Builders/Wells Fargo gauge decreased two points in April to 77, figures showed Monday. The measure has declined four straight months.
Mortgage rates have stormed higher against a backdrop of the fastest inflation in four decades and prospects the Federal Reserve will tighten monetary policy more aggressively. The average 30-year fixed mortgage rate last week hit 5%, up from 3.11% at the end of 2021, according to Freddie Mac data.
“The housing market faces an inflection point as an unexpectedly quick rise in interest rates, rising home prices and escalating material costs have significantly decreased housing affordability conditions, particularly in the crucial entry-level market,” said Robert Dietz, chief economist at the NAHB.
Despite lean inventory, efforts by builders to boost production have been hindered by supply-chain challenges, soaring materials costs and difficult hiring conditions.
The NAHB’s measure of current sales dropped two points to 85, the lowest since September. A gauge of prospective buyer traffic decreased 6 points to an eight-month low of 60. Sales expectations for the next six months improved after dropping in March to the weakest reading since mid-2020.