• All three components dropped this month after climbing in June
  • Builder sentiment in South falls as other three regions gain

Confidence among U.S. homebuilders declined in July from a five-month high, showing the construction industry remains in a slow, if unspectacular, recovery as the busiest part of the selling season comes to a close, according to data Monday from the National Association of Home Builders/Wells Fargo.

Key Points

  • Builder sentiment gauge declined to 59 from 60
  • Median forecast in a Bloomberg survey was for it to hold at 60; readings greater than 50 indicate more respondents reported good market conditions
  • Gauge of prospective buyer traffic declined to 45 from 46
  • Measure of six-month sales outlook decreased to 66 from from a seven-month high of 69, while index of current sales fell 1 point to 63

Big Picture

The NAHB index has held within a narrow range of 58 to 61 this year, signaling builders are generally positive about the outlook although there has been little additional momentum to propel sentiment to a higher level. Ultra-low mortgage rates, employment gains and a growing number of households as younger Americans start families will feed demand for housing, while slow wage growth and memories of the industry’s collapse during the last recession remain restraints. The index reached a low of 8 in January 2009 and a high of 78 in 1998.

Economist Takeaways

“For the past six months, builder confidence has remained in a relatively narrow positive range that is consistent with the ongoing gradual housing recovery that is underway,” said NAHB Chairman Ed Brady, a homebuilder and developer from Bloomington, Illinois. “However, we are still hearing reports from our members of scattered softness in some markets, due largely to regulatory constraints and shortages of lots and labor.”

The Details

  • Confidence dropped only in the South, where it fell to 60 this month from 64 in June
  • Sentiment improved in the Northeast, Midwest and West, where it climbed to a six-month high
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