United States
The NAHB July builder sentiment index fell to 64 from a revised 66 in June (from 67). This is 3 pts below the forecast and is now just 1 pt above the pre election level of 63 seen in both October and November. One of factors causing some builder angst is the increasing concern “over rising material prices, particularly lumber. This is hurting housing affordability even as consumer interest in the new home market remains strong.” Remember that the Trump Administration put tariffs on Canadian lumber imports back in April and we are seeing again that there are no free lunches with trade spats. What was not mentioned but is still an issue is the high costs of labor, lots and regulatory permits. Both current conditions and future expectations fell 2 pts. Prospective Buyers Traffic fell 1 pt to 48. I can’t square up why this particular component remains below 50 at the same time the NAHB said that consumer interest for new homes remains strong. I’ll go with the belief that demand is still pretty good, especially for lower priced homes below $250k but persistently rising prices of 5-6% is not helpful in bringing out more first time buyers. While mortgage rates help cushion those increases, it takes more and more money for a down payment from many younger people that don’t have much in savings.
Bottom line, 64 is still a good level relative to the 50 breakeven but this is just another confidence index, whether via business or consumer, that has cooled recently after the post election jump.
NAHB BUILDER SURVEY
Peter is the Chief Market Analyst with The Lindsey Group. He is Co-CIO at Bookmark Advisors, a member of the Advisory Services Network and a regular CNBC Contributor.