Sentiment among American homebuilders unexpectedly fell to the lowest level this year in June
The National Association of Home Builders/Wells Fargo index of housing market conditions fell 2 points to 43. This month’s numbers fell short of estimates from all economists in a Bloomberg survey, who had an average forecast of 46 .
A measure of sales prospects for the next six months fell 4 points this month to 47. That followed a 9-point drop in May, the biggest since October 2022. The Traffic Meter for Potential Buyers and the NAHB Index of Current Sales both fell to their lowest levels this year.
“Persistently high mortgage rates are keeping many potential buyers on the sidelines,” Carl Harris, president and builder of NAHB of Kansas, said in a statement. “Home builders are also facing higher construction and development loan rates, chronic labor shortages and a shortage of buildable lots.”
At the same time, the industry and potential buyers may soon find some relief from high financing costs. Separate figures Wednesday showed the average interest rate on a 30-year fixed mortgage fell below 7% last week for the first time since March.
Mortgage rates are moving in parallel with government bond yields, which also fell significantly last week as recent data showed a broad cooling of inflation pressures. That prompted traders to raise expectations that the Federal Reserve is in a better position to continue cutting rates, possibly as early as September.
Cheaper financing costs have the potential to soften some of the impact of higher prices on the resale market.
This month, 29% of builders reported lowering home prices, the largest share since January, according to the NAHB survey. The average price decline remained stable at 6% for the twelfth month in a row. The share that used sales incentives rose from 59% in May to 61%.
Builder sentiment fell in the Midwest and South, while improving slightly in the West and Northeast.