National Association of Home Builders CEO Jerry Howard warned on Wednesday that the United States is currently in a housing affordability "crisis" caused by a supply shortage.
Speaking on "Varney & Co." he added that the housing market in his sector is "definitely" experiencing a slowdown.
"We are seeing reductions in traffic for new homes; we are seeing cancellations of contracts; building permits are going down," Howard told host Stuart Varney, adding that, "we believe we are in a recession."
New home sales in June fell to the lowest level since April 2020, signaling declining builder sentiment as construction bottlenecks continue to slow new home building and raise housing costs, NAHB noted in a news release.
The association pointed to data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, which revealed that sales of newly built, single-family homes in June fell 8.1% from May and that new home sales dropped 13.4% in 2022 year-to-date.
US PENDING HOME SALES TUMBLE 20% IN JUNE AS MORTGAGE RATES SURGE
NAHB Chairman Jerry Konter, who is a home builder and developer from Savannah, Ga., noted that, "builders saw sales decline significantly as buyers were priced out of the market on higher interest rates," also attributing the decline to the ongoing home building and development costs, including building materials.
NAHB’s assistant vice president for forecasting and analysis, Danushka Nanayakkara-Skillington, pointed out that "deteriorating affordability conditions and growing sticker shock" are contributing to the latest trends, as "only 14% of new home sales in June were priced below $300,000" compared to 27% the same time last year.
Nanayakkara-Skillington also noted that "inventory levels are elevated and will contribute to near-term production declines as the market finds a new balance."
CERTAIN CALIFORNIA, IDAHO, FLORIDA HOUSING MARKETS MOST SUSCEPTIBLE TO DOWNTURN IN A RECESSION
The median sales price of a new single-family home dipped to $402,400 in June, down 9.5% compared to May, but is up 7.4% compared to the same time last year, the NAHB reported.
"Right now I would say that for new homes it is very, very tough to sell it and make a profit on it - and so they are not going to build it if they can’t," Howard told Varney Wednesday.
HOUSING STARTS IN JUNE PLUNGE TO LOWEST LEVEL IN 9 MONTHS
Last month it was revealed that builder confidence plunged in July amid soaring inflation and increased interest rates, which stalled the housing market by dramatically slowing sales and traffic from prospective buyers.
Home builder confidence in the market for newly-built single-family homes dropped 12 points lower to 55 in July, its seventh consecutive monthly decline, according to the NAHB/Wells Fargo Housing Market Index (HMI) released last month.
The index can range between 0 and 100 with any print over 50 indicating positive sentiment. Any reading above 80 signals strong demand.
The data marked the lowest HMI reading since May 2020 and the largest single-month drop in the history of the index, with the exception of the 42-point drop in April 2020, the association noted.
Speaking on "Varney & Co." last month following the release of builder confidence data, Howard stressed that there is no doubt that it provides a clear sign that the housing market is slowing.
On Wednesday, FOX Business’ Madison Alworth reported that realtors noted a slowdown in the market.
Realtor Linda Okupski of Keller Williams Real Estate in New Jersey explained how the market has changed over the past few months, noting that certain factors that didn’t make a difference last year, matter a lot more now.
Okupski said she "could sell a cardboard box under a bridge last year and have a markup of an incredible amount of money," but "now the condition of the house matters, the pricing of the house matters and how you market the house."
Real estate company Redfin noted in a news release last month that homebuyers are getting some relief as sellers slash their prices at a record rate.
Redfin also said that the portion of homes going for above list price fell for the first time since June 2020 as sellers reacted to slowing demand from homebuyers amid the economic landscape.
MORTGAGE RATES ADD TO RECESSION WOES
Howard told Varney on Wednesday that he believes homeowners looking to sell are prepared to take a lower price right now.
"I think that homeowners that need to sell are trying to get out ahead of the full brunt of any kind of recession that might stick around for a while," he said.
Last week it was revealed that the U.S. economy shrank in the spring for the second consecutive quarter, meeting the criteria for a so-called technical recession as raging inflation and higher interest rates forced consumers and businesses to pull back on spending.