US Homebuilder Sentiment Falls on Softer Demand on Two-Year Low

    Bloomberg News reports that US homebuilder sentiment dropped to a 2-year low in June as surging inflation and higher mortgage rates weighed on the housing demand.


    More on it

    The National Association of Home Builders/Wells Fargo gauge declined two points to 67 in June, the lowest level since June 2020, as indicated by the figures released on Wednesday. That has marked the sixth straight drop in the index.

    There has been a widespread slowdown in the housing market that the homebuilders are facing. A rapid surge in the mortgage rates has crippled affordability and led to a downturn in the sale of homes in recent months. In the meantime, lead times for the materials have remained long, labor is still challenging to find, and the costs are pretty on the higher side.

    According to the chief economist associated with the NAHB, Robert Dietz, the housing market is facing both supply-side and demand-side challenges. He also stated that the cost of materials for residential construction is up by 19% year-over-year, with the price increasing for various building inputs.

    The surge in the mortgage rates on the demand side of the market has priced out a significant number of potential homebuyers for the first half of 2022.

    The prospective buyer of the group’s gauge traffic dropped five points to 48, again the lowest since June 2020. The measure of the current sales also dropped to a two-year low, and the sales expectations declined to the lowest since May 2020 for the next six months.

    Bloomberg News reports that builder sentiment dropped in three to four regions by region. However, in the Midwest, there was an improvement in sentiments.

    Earlier this month, a separate report indicated that 69% of the construction companies reported fewer or no qualifying applicants in May, per a small survey of small businesses carried out by the National Federation of Independent Business.


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