Real Estate

Homebuilder confidence slips 2 points in June to 67 despite strong demand for new homes

Key Points
  • Homebuilder sentiment has dropped decidedly since its surge following the election of President Donald Trump.
  • Yet builders say they remain optimistic about deregulation.
Homebuilder confidence slips 2 points in June

A shortage of housing and falling mortgage rates should make homebuilders happier than ever, but apparently, they're not.

A monthly survey of builder sentiment fell 2 points in June to 67, and May's reading was revised down by 1 point. While anything above 50 is considered positive on the National Association of Home Builders survey, sentiment has dropped decidedly since its surge following the election of President Donald Trump.

Builders were initially euphoric over the possibility of deregulation under the new administration. An increase in state and federal regulations for land, zoning and construction lending have increased costs for builders who were already struggling with higher prices on labor and materials.

"As the housing market strengthens and more buyers enter the market, builders continue to express their frustration over an ongoing shortage of skilled labor and buildable lots that are impeding stronger growth in the single-family sector," said NAHB Chief Economist Robert Dietz.

Builders, however, claim they are not losing confidence in the administration's promise of deregulation. They already won a major victory in restrictions having to do with water, after the president in March signed an executive order that affects permitting. Confidence jumped to a high of 71 then but has since fallen.

"Right now, for our midyear meeting, we have 1,000 builders visiting Washington. I am not seeing any signs that our members have lost confidence in this administration. In fact, I would say they are looking forward to the next phase of Trump's agenda: finance reform," said NAHB CEO Jerry Howard.

Of the index's three components, current sales conditions fell 2 points to 73, and sales expectations over the next six months fell 2 points to 76. The component measuring buyer traffic dropped 2 points to 49, now in negative territory.

Regionally, on a three-month moving average, builder confidence in the Midwest and South each fell 1 point to 67 and 70, respectively. The Northeast and West dropped 2 points to 46 and 76, respectively.

Sales of newly built homes fell dramatically in April, the latest reading from the U.S. Census, down 11 percent for the month. Higher prices for new construction are getting in the way of strong demand, especially at the entry level.