US homebuilder confidence retreated in June as the industry continued to grapple with elevated borrowing costs and higher input prices, according to a monthly survey released Monday.
The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) decreased by two points to 35 in June. The reading has been under the 40 threshold for 14 straight months - the longest such run since the 2011-2012 foreclosure crisis - underscoring persistent weakness in builder sentiment.
Economists surveyed ahead of the release had anticipated the index would hold at 37. The NAHB pointed to several pressures weighing on the market: climbing materials costs, sustained upward pressure on mortgage rates and continued affordability constraints for prospective buyers.
Mortgage borrowing costs have risen in recent months. The report links part of that increase to geopolitical developments - the US-Israel war on Iran lifted oil prices, which the NAHB says in turn contributed to higher inflation and pushed Treasury yields up. Data from mortgage-finance agency Freddie Mac show the rate on a 30-year fixed mortgage has climbed by more than 50 basis points since the conflict began at the end of February.
More optimistic language followed the recent developments in the region: Washington and Tehran on Sunday said they had agreed to terms to end the war and to reopen the Strait of Hormuz. The survey does not quantify any immediate market reaction to that announcement.
The headwinds facing builders predate the conflict. The NAHB noted that import tariffs had already elevated the cost of construction materials and household appliances. Those cost increases, combined with higher borrowing costs, accompany a broader pullback in activity - residential investment, which includes homebuilding, has contracted for five straight quarters.
This month's HMI reading and the underlying drivers highlight continuing stress on the residential construction sector and related markets. Builders are operating in an environment of tighter affordability for buyers and higher input and financing costs, conditions that have coincided with several quarters of declining residential investment.
Summary
Homebuilder sentiment fell in June, with the NAHB/Wells Fargo HMI slipping two points to 35. The index has been below 40 for 14 months - its longest stretch since the 2011-2012 foreclosure crisis. The NAHB cited rising material costs, elevated mortgage rates and ongoing affordability issues; Freddie Mac data show the 30-year fixed mortgage rate is up more than 50 basis points since the conflict began at the end of February. Washington and Tehran said they had agreed to end the war and reopen the Strait of Hormuz. Residential investment has contracted for five consecutive quarters.