U.S. homebuilder sentiment unexpectedly posts first drop in 2019

U.S. HOMEBUILDER sentiment posted its first decline in 2019 in June. / BLOOMBERG NEWS FILE PHOTO/LUKE SHARRETT
U.S. HOMEBUILDER sentiment posted its first month-to-month decline in 2019 in June. / BLOOMBERG NEWS FILE PHOTO/LUKE SHARRETT

WASHINGTON – Sentiment among United States homebuilders unexpectedly posted the first decline this year, suggesting lower mortgage rates are failing to give the housing market a sustained boost amid property prices that remain out of reach for many buyers.

The National Association of Home Builders/Wells Fargo Housing Market Index fell two points to 64 in June, according to a report Monday that was below all estimates in a Bloomberg survey predicting a gain. All three components declined, with sales expectations hitting a four-month low. Readings above 50 indicate more builders view conditions as good than poor.

Key insights

  • Homebuilders cited rising costs for development and construction, along with concern over trade issues and labor shortages, according to the report. The figures contrast with some signs that the housing market is picking up, as a gauge of mortgage applications jumped earlier this month by the most in four years, while new-home construction advanced in March and April
  • The report follows a record decline Monday in the New York Fed’s Empire State factory index, suggesting some parts of the economy are heading to a weak finish in the second quarter. Reports out Friday showed solid retail sales and manufacturing output in May, indicating growth is uneven as Federal Reserve policy makers prepare to discuss interest rates at a meeting this week. Investors expect the central bank to lower borrowing costs in July

Official’s view

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“Despite lower mortgage rates, home prices remain somewhat high relative to incomes, which is particularly challenging for entry-level buyers,” NAHB Chief Economist Robert Dietz said in a statement. “Builders continue to grapple with excessive regulations, a shortage of lots and lack of skilled labor that are hurting affordability and depressing supply.”

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  • The index declined in the Northeast and West while rising in the Midwest to the highest since October. It was unchanged in the South.
  • Economists in a Bloomberg survey had projected the main housing sentiment index would rise from 66 to 67
  • The Washington-based trade association represents more than 140,000 members in areas ranging from building and remodeling to housing finance

Ryan Haar is a reporter for Bloomberg News.