NAHB: Home Builder Sentiment Rises as Lower Rates Offset Higher Costs

A private gauge of U.S. home builder sentiment increased in July as falling mortgage rates offset rising building costs and worries about global trade tensions.

The National Association of Home Builders and Wells Fargo & Co. (WFC) said on Tuesday their index of builder confidence in newly built, single-family homes increased to 65 from 64 in June. Analysts polled by Reuters had forecast the reading to remain steady at 64.

“Builders report solid demand for single-family homes. However, they continue to grapple with labor shortages, a dearth of buildable lots and rising construction costs that are making it increasingly challenging to build homes at affordable price points relative to buyer incomes,” NAHB Chairman Greg Ugalde said in a statement.

The NAHB index is seen as a proxy on domestic housing starts, which will be released on Wednesday at 8:30 a.m. EDT (1230 GMT). Analysts polled by Reuters forecast home builders likely broke ground at an annualized pace of 1.261 million units in June, down from a 1.269 million pace in May.

The NAHB survey’s components rose broadly in July.

The gauge on current single-family home sales rose to 72 from 71 while the barometer on prospective buyers increased one point to 48.

The measure on expectations on home sales over the next six months edged up to 71 from 70 in June.

Last week, interest rates on U.S. 30-year fixed mortgages fell to 4.04% from 4.07% the previous week.

“Attractive rates should help spur new home purchases in large metro suburban markets, where approximately one-third of new construction takes place,” NAHB Chief Economist Robert Dietz said in a statement.