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SALT LAKE CITY — For the fifth straight month, national homebuilder confidence fell, according to the National Association of Home Builders/Wells Fargo Housing Market Index.
The index fell eight points in May to 69 — the lowest level for builder confidence for new, single-family homes since June of 2020.
"The housing market is facing growing challenges," said a prepared statement from Robert Dietz, the homebuilder association's chief economist. "Building material costs are up 19% from a year ago; in less than three months, mortgage rates have surged to a 12-year high; and based on current affordability conditions, less than 50% of new and existing home sales are affordable for a typical family."
Dietz went on to say that entry-level and first-time buyers are struggling the most with the sharp increase in mortgage rates.
The National Association of Home Builders has conducted the monthly survey for more than 35 years. Any number over 50 indicates that more builders perceive market conditions as good than poor.
The survey asks about three areas: current sales of new homes, expectations for sales over the next six months and traffic of prospective buyers. All three areas dropped in May.
"Housing leads the business cycle and housing is slowing," said the association's chairman Jerry Konter in a press release. "The White House is finally getting the message and yesterday released an action plan to address rising housing costs that emphasizes a very important element long-advocated by NAHB — the need to build more homes to ease the nation's housing affordability crisis."
Wells Fargo senior economist Mark Vitner told KSL TV the survey still reflects a healthy market but also shows there are growing concerns from homebuilders.
"I think the big takeaway is that interest rates have risen faster than people expected and into a higher level, and it's taking a little bit of a toll on the housing market," Vitner said.
Vitner said first-time homebuyers are still very active in the housing market, even though affordability has been an issue for some time.
"With rising interest rates, folks are worried that demand is not going to hold up, but right now, that's not a problem, and that's particularly the case in Utah where the economy is so much stronger than it is in the country as a whole," Vitner said. "The demand for homes in Utah is far outpacing the supply that builders can deliver right now."
The Salt Lake Home Builders Association said Utah's economy is strong.
"Here in Utah, the fundamentals are sound," said Jaren L. Davis, executive director of the Salt Lake Home Builders Association.
Builders still have large lists of people that are interested in their homes. So maybe some fall off of that and maybe some contracts fall out of place, but somebody is being put back in the slot pretty quickly.
–Jaren L. Davis, Salt Lake Home Builders Association
But Davis said there are signs that the housing market is undergoing some changes.
"Our builders are seeing lower traffic," he said." They're seeing, perhaps, an increase in the number of cancellations in contracts, but what that's taking us to is more of a normal market."
Davis said Utah's ongoing housing shortage and growing population should keep demand high.
"Builders still have large lists of people that are interested in their homes," Davis said. "So maybe some fall off of that and maybe some contracts fall out of place, but somebody is being put back in the slot pretty quickly."
National builder sentiment is better in the west, with the region's three-month moving average dropping six points in May to 83.