Homebuilder Sentiment Steady Amid Strong Demand, Rising Costs

Confidence among U.S. homebuilders held steady in July, matching the lowest level of the year, as solid job gains support demand while elevated material costs pressure developers, according to a report Tuesday from the National Association of Home Builders/Wells Fargo.

Highlights of Homebuilder Sentiment (July)

Housing Market  Index unchanged from prior month at 68 (est. 68) Gauge of six-month sales outlook fell to 73, lowest since Sept., from 75 Current-sales measure for single-family homes unchanged at 74; gauge of prospective  buyer traffic rose to 52, highest since Feb., from 50

Key Takeaways

• While sentiment remains elevated and near the highest level of the expansion, gains have stalled amid more expensive materials, partly the result of tariffs on imported lumber. That’s making it tougher to construct homes at attractive prices, especially for customers hoping to buy for the first time, and mortgage rates are also close to a seven-year high.
• At the same time, bigger after-tax paychecks and a strong labor market are supporting homebuilders’ views. A recent drop in lumber prices from a record high in May could also provide some relief.
• Government data due Wednesday are projected to show builders broke ground on fewer homes in June following the fastest pace of starts since 2007, while permits picked up from an eight-month low.

Official’s View

“Builders are encouraged by growing housing demand, but they continue to be burdened by rising construction material costs,” NAHB Chief Economist Robert Dietz said in a statement.

Other Details

• Index fell in West to lowest level in more than a year; also declined in Northeast Gauge rose in South, unchanged in Midwest