U.S. homebuilder sentiment declines in July as affordability pressures persist
Economic uncertainty and elevated mortgage rates are keeping pressure on the U.S. housing market, with builders facing softer demand from prospective buyers in July. The latest industry reading extends a prolonged stretch of weak confidence and comes as companies increasingly use price cuts and sales incentives to support activity.
Highlights
- The NAHB/Wells Fargo Housing Market Index fell two points to 34 in July, missing expectations and marking the 15th month below 40 in a row.
- Mortgage rates are expected to remain high amid renewed U.S.-Iran tensions, exacerbating affordability challenges for homebuilders and buyers.
- The share of builders reporting price cuts increased to 37% in July, while sales incentives usage rose to 63%, sustaining pressures on margins.
July survey shows weaker builder confidence
As reported by Reuters, citing the National Association of Home Builders and Wells Fargo, the Housing Market Index falls two points to 34 in July from an upwardly revised 36 in June. The result is below economists' expectations for an unchanged reading of 35 and marks the 15th straight month that the index remains under 40, the longest such run since 2012.NAHB Chairman Bill Owens says many potential buyers remain on the sidelines while they wait for lower mortgage rates, more certainty on inflation and a clearer economic outlook. The survey's measure of current sales conditions slips one point to 37, its gauge of future sales falls two points to 43, and the measure of prospective buyer traffic declines two points to 23.
Affordability strains shape housing outlook
Mortgage rates are likely to stay elevated amid renewed hostilities between the United States and Iran following the collapse of a fragile ceasefire last week, adding to affordability challenges for the sector.The NAHB welcomes bipartisan housing affordability legislation recently passed by the U.S. Congress, saying the new law could help expand supply and lower overall housing costs. Chief economist Robert Dietz says more policy changes are still needed at the state and local level.
The share of builders reporting price cuts rises to 37% from 35% in June, while the average reduction remains unchanged at 6%. The use of sales incentives increases to 63% from 62%, marking the 16th consecutive month that this share reaches 60% or higher.
In our earlier coverage, we noted that rising tensions between the U.S. and Iran pushed investors into a risk-off stance in London trading, weighing on the FTSE 100. The piece also highlighted a major deal—ABB’s agreed takeover of Rotork—which helped support the FTSE 250 and underscored how overseas buyers are increasingly targeting London-listed companies amid relatively low UK valuations.
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