Stressors Causing Builder Sentiment to Plateau

Added costs arising from tariffs, land, and labor are keeping builders from meeting demand, keeping home builder confidence unchanged from June to July at 68 points.

The monthly sentiment survey from the National Association of Home Builders considers scores over 50 points as positive. Even though buyer demand is high this summer, NAHB chief economist Robert Dietz advises that builders should overhaul the way they handle cost increases from labor, land, and materials to be able to offer "competitively priced homes, especially as more first-time home buyers enter the housing market." CNBC reports that builders are currently focusing on the move-up and luxury sectors.

Sales of newly built homes are still not even close to their historically normal levels, but prices continue to rise. Builders should be benefiting from the severe shortage of existing homes for sale, but weakened affordability stands in the way of higher sales. Of the NAHB index’s three components, current sales conditions remained unchanged at 74. Sales expectations in the next six months dropped two points to 73, and the metric charting buyer traffic rose two points to 52.

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