Due to Inflation and Interest Rate Hikes... US July Housing Market Index Plummets

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Builders' confidence in the U.S. housing market has plummeted to its lowest level since the pandemic. This is a consequence of rapidly freezing investment sentiment surrounding the housing market due to soaring inflation and rising interest rates.

According to economic media CNBC on the 18th (local time), the National Association of Home Builders (NAHB) announced that the housing market index for July was recorded at 55, down 12 points from the previous month. This decline is the largest drop in 37 years since the survey began, except for April 2020, right after the pandemic. It also falls short of market expectations (66).

Although exceeding the baseline of 50 still indicates an expansion phase, the index has dropped by a total of 24 points since March, when mortgage rates began to rise in the U.S. The average 30-year fixed mortgage rate currently approaches 6%, nearly doubling compared to January.

Among the three components that make up the index, builders' sentiment on current sales conditions fell 12 points to 64, sales expectations for the next six months dropped 11 points to 50, and buyer traffic sentiment decreased 11 points to 37.

NAHB analyzed that the housing construction market is being affected by a combination of rising costs due to inflation and supply chain disruptions. As another sign of market deterioration, 13% of builders participating in this survey reported lowering home prices last month to facilitate sales.