Home Builder Confidence Slips in July as Materials Costs Rise, But Sector Foundation Strong

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The National Association of Home Builders (NAHB)/Wells Fargo housing market index for July fell to 64, down 2 points from a revised June reading of 66. Economists polled by Bloomberg were expecting an index reading of 68. An index reading above 50 indicates that more builders view sales conditions as good than view them as poor.

NAHB Chairman Granger MacDonald said there is concern among builders over rising materials prices and that is hurting affordability “even as consumer interest in the new-home market remains strong.”

The current sales conditions sub-index for July fell to 70 from 72 and the sub-index that estimates prospective buyer traffic dipped one point to 48. The sub-index measuring sales expectations for the next six months slipped by 2 points to 73.

The NAHB’s chief economist said:

The HMI (housing market index) measure of current sales conditions has been at 70 or higher for eight straight months, indicating strong demand for new homes. However, builders will need to manage some increasing supply-side costs to keep home prices competitive.

In the NAHB’s regions, three-month moving average indexes rose in all four areas. In the Northeast, the index increased one point to 47 while the index fell by one point in both the West and Midwest to July scores of 75 and 66, respectively. In the South, the index declined three points to 67.

The NAHB/Wells Fargo housing market index has remained in the 60-point range since June of 2015. Prior to mid-2013, the index had not risen to 50 since mid-2006.