Key facts
- U.S. homebuilder sentiment fell to 34 in July, down from 36 in June.
- This is the longest stretch below 40 on the index since 2012.
- 37% of builders reported cutting prices in July.
- 63% of builders reported using sales incentives.
- Pending home sales index fell 5.4% in June to 72.5.
- Contracts to purchase previously owned U.S. homes fell in all four regions in June.
- A bipartisan housing affordability legislation was enacted.
U.S. homebuilder sentiment unexpectedly declined in July, falling two points to 34 on the National Association of Home Builders/Wells Fargo Housing Market index. This marks the 15th consecutive month the index has been below 40, the longest such period since 2012, indicating persistent challenges in the housing market.
Contracts to purchase previously owned U.S. homes fell more than expected in June, with the pending home sales index tumbling 5.4% to 72.5. This decline was attributed to higher mortgage rates and record-high home prices, which are pushing prospective buyers to the sidelines, particularly first-time homebuyers.
Economic uncertainty and elevated mortgage rates, potentially exacerbated by renewed geopolitical tensions, are keeping potential buyers hesitant. NAHB chairman Bill Owens noted that many buyers are waiting for lower mortgage rates, clearer inflation signals, and a more stable economic outlook.
The share of builders reporting price cuts increased to 37% from 35% in June, with the average price reduction remaining at 6%. The use of sales incentives also rose slightly to 63%, a level sustained for 16 months. Measures for current sales conditions, future sales, and prospective buyer traffic all saw declines.
A bipartisan housing affordability legislation was recently enacted. NAHB chief economist Robert Dietz stated that the law is a positive step towards expanding housing supply and lowering costs, though further policy changes are needed at state and local levels. President Donald Trump did not sign the bill, demanding a separate voting bill be passed.