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Homebuilders’ outlook posts unexpected drop for first time this year

Lower mortgage rates have failed to bring property prices down to an affordable level

(Credit: iStock)
(Credit: iStock)

Confidence among the country’s homebuilders took an unexpected dip in June amid concerns over rising costs and trade issues.

The National Association of Home Builders/Wells Fargo Housing Market Index fell two points to 64 for the first drop in 2019, according to Bloomberg. A score above 50 shows that more developers perceive sales as good, rather than bad.

Lower mortgage rates have failed to boost confidence in the US housing market, as homes remain too expensive for most buyers.

“Despite lower mortgage rates, home prices remain somewhat high relative to incomes, which is particularly challenging for entry-level buyers,” NAHB Chief Economist Robert Dietz told Bloomberg. “Builders continue to grapple with excessive regulations, a shortage of lots and lack of skilled labor that are hurting affordability and depressing supply.”

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A Bloomberg survey had initially predicted the housing sentiment index would rise from 66 to 67.

It stands in stark contrast to a promising start to the year for the industry. After mortgage rates dropped to 13-month lows, shares of home-building companies were on track for their best quarter in seven years. At the time, major homebuilders Beazer Homes USA, BZH, Lennar, KB Home and D.R. Horton all recorded share price increases of about 20 percent.

The recent figures suggest that the housing market is in fact not on the rise, as home-builders complained that increasing construction costs had contributed to higher property prices.

[Bloomberg] — David Jeans