“Persistently high mortgage rates are keeping many prospective buyers on the sidelines,” NAHB chairman Carl Harris said in the association’s latest HMI report. “Home builders are also dealing with higher rates for construction and development loans, chronic labor shortages and a dearth of buildable lots.”
Builders are struggling to attract buyers in this environment. The June survey revealed that 29% of builders cut home prices to bolster sales, the highest share since January 2024 at 31% and up from 25% in May. However, the average price reduction held steady at 6% for the 12th consecutive month.
Meanwhile, the use of sales incentives ticked up to 61% in June from 59% in May, the highest share since January when it stood at 62%.
“We are in an unusual situation because a lack of progress on reducing shelter inflation, which is currently running at a 5.4% year-over-year rate, is making it difficult for the Federal Reserve to achieve its target inflation rate of 2%,” explained NAHB chief economist Robert Dietz.
“The best way to bring down shelter inflation and push the overall inflation rate down to the 2% range is to increase the nation’s housing supply. A more favorable interest rate environment for construction and development loans would help to achieve this aim.”
