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Homebuilder sentiment inches lower despite demand for single-family homes

A contractor stacks roofing materials while working on a home under construction at the Toll Brothers Bowes Creek Country Club community in Elgin, Illinois.

Daniel Acker | Bloomberg | Getty Images

The nation’s homebuilders reported solid confidence in the housing market in June, but levels dropped slightly due to concerns over trade issues, the high costs of construction and the lack of skilled labor.

Builder confidence dipped to 64, according to the monthly National Organization of Home Builders/Wells Fargo Housing Market Index (HMI). That’s down from 66 in May and 68 in June 2018.

Sentiment has remained in the low 60s for the past five months. Anything above 50 is considered positive.

“While demand for single-family homes remains sound, builders continue to report rising development and construction costs, with some additional concerns over trade issues,” said NAHB Chairman Greg Ugalde, a home builder and developer from Torrington, Conn.

All of the index’s three components fell slightly. Current sales conditions decreased one point to 71. Buyer traffic dropped one point to 48. Sales expectations over the next six months fell two points to 70.

Mortgage rates have been falling since November of last year, and hit the lowest level in two years this month, which would normally signal a buying frenzy. But affordable, entry-level homes just aren’t available. Many builders say they are focused on building more affordable homes, but hurdles exist.

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

Looking at the three-month moving averages for regional HMI scores, the Northeast posted a three-point gain to 60 and the Midwest was also up three points to 57. The West held steady at 71 and the South fell a single point to 67.

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