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Homebuilder Confidence Drops For 8th Consecutive Month, U.S. in 'Housing Recession' The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) dropped six points in August.

By Madeline Garfinkle

Opinions expressed by Entrepreneur contributors are their own.

There's more than one kind of recession, and we may already be in one: housing.

The housing market breached negative territory in August, marking what the National Association of Home Builders says is a "housing recession," CNBC reported.

The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) is a survey that estimates conditions of the single-family housing market. Any index below 50 is considered negative, and with a six-point drop in August, the index fell to 49.

The HMI assesses market conditions based on three main factors: current sales of single-family homes, prediction of single-family sales for the next six months, and traffic of prospective buyers. The six-point drop in August marks the eighth consecutive month of a decline in the index, signaling a steady deterioration of market conditions which has led to what experts are calling a "housing recession."

Related: US Home Price Gains Slowed Again in October

The index has not been in negative territory since 2020 when it took a short-lived plunge at the beginning of the pandemic before quickly bouncing back.

According to National Association of Home Builders chief economist Robert Dietz, "tighter monetary policy from the Federal Reserve" and a spike in construction costs are the likely culprits that led to the housing recession, according to CNBC.

"The total volume of single-family starts will post a decline in 2022, the first such decrease since 2011," Dietz told the outlet. "However, as signs grow that the rate of inflation is near peaking, long-term interest rates have stabilized, which will provide some stability for the demand-side of the market in the coming months."

Related: The Real Estate Housing Market Is Shifting: Too Many Homes, Not Enough Buyers

However, the market varies regionally, and while builder confidence dropped nationwide, some regions saw steeper falls than others. The Northeast and West saw the biggest drops, falling 9 and 11 points respectively — but those were also the regions that saw the highest spike in prices during the peak of homebuying competition.

It remains unclear how long the housing recession will persist, but the dramatic fall in market conditions — and prices already dropping — may lure in buyers who were previously priced out of the market.

Madeline Garfinkle

News Writer

Madeline Garfinkle is a News Writer at Entrepreneur.com. She is a graduate from Syracuse University, and received an MFA from Columbia University. 

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