Homebuilder sentiment slides to 10-month low in June

Material costs and record home prices subdue once-rampant optimism, NAHB says

Confidence is lowest in the Northeast and Midwest, at 73 and 70. (iStock)
Confidence is lowest in the Northeast and Midwest, at 73 and 70. (iStock)

The National Association of Home Builders/Wells Fargo Housing Market Index — which tracks homebuilder confidence in current and future single-family home sales and traffic of potential buyers — dropped to a seasonally adjusted 81 in June. That’s down from 83 in April and May and a 12-month high of 90 in November.

A reading above 50 is viewed as positive, but June’s readings are the lowest in 10 months. Confidence is lowest in the Northeast and Midwest, at 73 and 70, respectively, compared to 86 in the West and 85 in the South.

NAHB Chairman Chuck Fowke, a homebuilder from Tampa, Florida, attributed the declining optimism to soaring home prices and climbing construction costs.

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“These higher costs have moved some new homes beyond the budget of prospective buyers, which has slowed the strong pace of home building,” he told CNBC.

Robert Dietz, chief economist for the NAHB, explained that because appraisals “tend to lag” behind market prices and construction costs,lower-than-expected appraisals can force buyers to either put more equity into a deal or abandon the transaction.