New 'Troubling Sign' for U.S. Housing Market, According to Report

As the U.S. economy remains on shaky ground, declining builder confidence marks the latest "troubling sign" of a weak housing market, according to a new report.

Confidence among home builders fell for the eighth consecutive month in August, dropping six points to 49, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released on Monday. The report marks the first time since the pandemic began that the index fell below 50 points.

In a press release, NAHB Chairman Jerry Konter cited rising construction costs and mortgage rates for the weakened sentiment among builders.

Konter added that in "a troubling sign" that consumers are now opting out of home purchases due to increased housing costs, the index found that August's buyer traffic number fell to a record low since April 2014, with the exception of when the pandemic first hit in the spring of 2020.

Housing Market Economy Confidence
Green lawns are pictured in front of homes in a Los Angeles neighborhood on July 5. A new report has found that confidence among home builders fell for the eighth consecutive month in August. Frederic J. Brown/AFP

Existing-home sales have fallen more than 14 percent from last year, according to a report issued in July from the National Association of Realtors.

HMI scores for moving averages fell the most in the West and Northeast, which saw 11- and nine-point declines, although the lowest three-month average remains in the Midwest at 49 points.

The central bank hasn't shown signs that it'll stop its hawkish bumps, raising the rate by another 0.75 percentage points in both June and July—the largest back-to-back increases seen in decades.

"Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have brought on a housing recession," NAHB Chief Economist Robert Dietz said.

However, Dietz noted that with the rate of inflation near its peak, "long-term interest rates have stabilized," which he hopes will provide some stability on the demand side.

Housing prices have continued to rise consistently, despite the fall of other key costs like gas prices. Americans facing soaring costs at the pump finally saw some relief in mid-June as prices began to fall from historic highs, but a rocky economy hasn't brought down other costs.

Experts have warned that it's categories like fuel and housing that could leave detrimental impacts on young, working families.

"Those are bills that you cannot skip in a given month," Victor Claar, an associate professor of economics at Florida Gulf Coast University, previously told Newsweek. "You've got to feed your kids, if you commute to work, you've got to put gasoline in that car, and if you don't want to be evicted, you've got to make that rent payment."