US housebuilder sentiment falls to 11-month low

Sentiment among US housebuilders deteriorated a touch as expected in August, according to data released on Wednesday.

The National Association of Home Builders/Wells Fargo housing market index slipped to 67 from 68 in July, hitting an 11-month low and in line with analysts' expectations.

The component gauging current sales conditions ticked down one point to 73 and the index gauging expectations in the next six months fell one point to 72. The metric charting buyer traffic slipped two points to 49.

NAHB chairman Randy Noel said: "The good news is that builders continue to report strong demand for new housing, fuelled by steady job and income growth along with rising household formations. However, they are increasingly focused on growing affordability concerns, stemming from rising construction costs, shortages of skilled labour and a dearth of buildable lots."

NAHB chief economist Robert Dietz said that the solid economic expansion and firm job market should spur demand for new single-family homes in the months ahead.

"Meanwhile, builders continue to monitor how tariffs and the growing threat of a trade war are affecting key building material prices, including lumber. These cost increases, coupled with rising interest rates, are putting upward pressure on home prices and contributing to growing affordability challenges, as indicated by the latest quarterly reading of the NAHB/Wells Fargo Housing Opportunity Index."

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the housing market is the only significant sector of the economy to be weakening outright.

"The headline NAHB index peaked at 74 back in December, when the tax cuts were passed, but the combination of higher mortgage rates and the gradual tightening of lending standards for conventional mortgages is weighing on activity. Demand is not collapsing, but it is falling, and homebuilders' six-month sales expectations are at the lowest since November 2016. This will be reflected in due course in declining construction, though tomorrow's housing starts report will show that activity rebounded strongly in July after an unexpected plunge in June."