US home builder confidence dives as mortgage rates exceed 7%

HOUSTON (ICIS)–US builder confidence in the market for newly built single-family homes fell sharply in May as higher mortgage rates “hammer” confidence, the National Association of Home Builders said on Wednesday.

Mortgage rates averaged above 7% for the past four weeks as a lack of progress on reducing inflation pushed long-term interest rates higher, NAHB said.

The NAHB/Wells Fargo Housing Market Index (HMI) fell by six points from April to 45 in May – its first decline since November 2023.

HMI readings below the 50 neutral mark indicate that builders are pessimistic, readings above 50 that they are optimistic.

The high mortgage rates have pushed many potential buyers back to the sidelines and the market has slowed, NAHB said.

Another worry are new code rules that require the US Department of Housing and Urban Development and the US Department of Agriculture to insure mortgages for new single-family homes only if they are built to the 2021 International Energy Conservation Code.

This would further increase the cost of construction in a market “that sorely needs more inventory for first-time and first-generation buyers”, said NAHB chairman Carl Harris.

NAHB chief economist Robert Dietz added: “The last leg in the inflation fight is to reduce shelter inflation, and this can only occur if builders are able to construct more attainable, affordable housing.”

The housing market is a key consumer of chemicals, driving demand for a wide variety of chemicals, resins and derivative products, such as plastic pipe, insulation, paints and coatings, adhesives and synthetic fibers, among many others.

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Thumbnail photo source: NAHB