US homebuilder sentiment slips again to match year’s low
An index of overall market condition has remained below 40 for 15 straight months
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[WASHINGTON] Confidence among US homebuilders dropped for a second month to the lowest level of the year, dragged lower by elevated borrowing costs and higher material and land prices.
An index of overall market conditions from the National Association of Home Builders and Wells Fargo fell 2 points to 34 this month, according to data released on Thursday (Jul 16). Economists surveyed by Bloomberg had expected 35.
Anything under 50 indicates more builders see conditions as poor than good, and the index has remained below 40 for 15 straight months, the longest stretch since 2012.
“Affordability remains the home building industry’s primary challenge, as elevated mortgage rates, costly land, rising material prices, and persistent skilled labour shortages continue to affect the market,” NAHB chief economist Robert Dietz said in a release.
A separate report on Thursday showed contract signings for previously owned homes fell 5.4 per cent to 72.5 in June, based on National Association of Realtors data. That trailed the 0.5 per cent decline estimated by economists.
The drop in the builders’ confidence index reflects the industry’s sustained hurdles. A prolonged period of above-6 per cent mortgage rates, combined with a conflict in the Middle East and uncertainty over tariffs and the strength of the job market, has sunk new-home sales this year.
The sentiment index has three components – present sales, future sales and buyer traffic. They all fell in July.
Contractors have had to offer deals to lure prospective buyers, hurting profits and sapping their motivation to build. This month, 63 per cent of builders reported using sales incentives, compared with 62 per cent a month ago. Meantime, 37 per cent reported cutting prices, compared with 35 per cent last month.
Around the US, builder sentiment was particularly low in the Northeast, where it fell 9 points to 41, the biggest drop since November. The index was unchanged in the South after a noticeable drop in June, while it fell in the West and rose slightly in the Midwest. BLOOMBERG
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