Key facts
- US homebuilder sentiment fell to 35 in June, a 14-month low.
- Single-family housing starts dropped to 882,000 units in May, the lowest since September.
- Mortgage rates have increased by over 50 basis points since late February.
- Permits for future single-family home construction rose 0.6% in May.
- Residential investment has contracted for five consecutive quarters.
- 35% of builders reported cutting prices, and 62% used sales incentives in June.
U.S. homebuilder sentiment fell to a 14-month low in June, with single-family housing starts reaching an eight-month low in May, as rising mortgage rates and material costs continued to pressure the housing market. The National Association of Home Builders/Wells Fargo Housing Market index dropped two points to 35 in June, the longest stretch below 40 since 2011-2012.
Single-family housing starts, which constitute the majority of homebuilding, decreased 1.9% to a seasonally adjusted annual rate of 882,000 units in May, the lowest level since September. Year-on-year, single-family homebuilding declined 6.7% in May. This downturn follows five consecutive quarters of contraction in residential investment, a component that includes homebuilding.
Mortgage rates have climbed, with the popular 30-year fixed-mortgage rate increasing more than 50 basis points since late February, influenced by rising oil prices, inflation, and Treasury yields. Prior to this, import tariffs had already raised the cost of building materials and appliances. To counter weak demand, 35% of builders reported cutting prices in June, up from 32% in May, with an average reduction of 6%. Sales incentives were used by 62% of builders, a slight increase from 61% in May.
Permits for future single-family home construction saw a modest increase of 0.6% in May to 886,000 units, though they fell 1.8% year-on-year. Starts for multi-unit projects with five or more units plunged 41.6% in May, and overall housing starts dropped 15.4% to 1.177 million units. Overall building permits slipped 0.7% to 1.413 million units.