Expensive mortgages are the "No. 1 killer of the marketplace right now," says the NAHB CEO, who signals home builders, buyers and sellers are "pulling back."
As a large, gray cloud looms over American real estate, the CEO of one of the largest trade associations is revealing what may make it pour on the market.
"We had a better regulatory environment three or four years ago. We had this boom after COVID, people were looking to buy new homes and our industry was doing great," National Association of Home Builders CEO Jim Tobin said on "Varney & Co." Wednesday.
"The challenge we have now… inflation is absolutely the driver," he continued. "People are pulling back from the marketplace because they don't want to have a seven-handle on a mortgage, especially when they're sitting on a 3 or 4% mortgage."
"That's the No. 1 killer of the marketplace right now."
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The housing market index, which is reported by the NAHB and Wells Fargo and asks respondents to rate market conditions, dropped to a rating of 43 in June, a two-point decrease from the previous month and the lowest marker since the start of 2024.
Additionally, a recent report from Freddie Mac found that most homeowners who are locked into historically low mortgage rates are happy to remain in their current homes, except for millennials. As of June 18, the interest rate on a 30-year fixed-rate mortgage was just over 6.7% and the 15-year fixed-rate sat at 6%.
Housing costs were once again the biggest driver of inflation last month, accounting for more than two-thirds of the total monthly increase, according to May’s consumer price index (CPI). Rent costs rose 0.4% for the month and are up 5.3% from the same time last year. Rising rents are concerning because higher housing costs most directly and acutely affect household budgets.
"Shelter inflation is the largest problem with inflation coming down," Tobin said. "We're stuck in kind of the low threes with inflation, but shelter inflation is over 5%."
For home builders, construction financing has an interest rate around 12 to 13%, the CEO claimed.
"We have local regulatory costs [that] are absolutely killing our members because of delays. And then finally, regulatory burdens at the federal level are killer, too," he noted.
Tobin also weighed in on whether a Trump or Biden win in November is better for U.S. real estate.
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"We saw a lower regulatory environment under President Trump. We saw more output from the economy in the housing segment. So I expect more of the same if President Trump is reelected," Tobin pointed out.
"Conversely, President Biden…has pushed forward a lot of pro-building policies. He's talked about adding more supply. But we're getting this muddled message from this White House."
FOX Business’ Megan Henney contributed to this report.
