© Bloomberg. A worker saws a section of lumber inside a home under construction at the M/I Homes Inc. Bougainvillea Place housing development in Ellenton, Florida, U.S., on Thursday, July 6, 2017.
(Bloomberg) — US homebuilder sentiment tumbled this month by the most since the immediate aftermath of the pandemic as firms faced higher materials costs and a slowdown in demand.
The National Association of Home Builders/Wells Fargo gauge decreased 8 points in May to 69, the steepest drop since April 2020, figures showed Tuesday. The index has declined five straight months and stands at the lowest level since June 2020. The reading was weaker than all but one estimate in a Bloomberg survey of economists.
Measures of current purchases, expected sales and traffic of prospective buyers all showed marked deteriorations from a month earlier.
Homes have become less affordable in recent months with mortgage rates reaching the their highest level since 2009 and asking prices continuing to rise. What’s more, builders are contending with sharply higher costs for materials as well as labor.
“The housing market is facing growing challenges,” Robert Dietz, chief economist at the NAHB, said in a statement. “Entry-level and first-time home buyers are especially bearing the brunt of this rapid rise in mortgage rates.”
The NAHB’s measure of current sales dropped 8 points to 78 while a gauge of prospective buyer traffic decreased 9 points to 52 — the lowest levels since the summer of 2020.
Sales expectations for the next six months slumped 10 points to 63.
By region, builder sentiment declined in all regions except the Northeast.
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US Homebuilder Sentiment Tumbles by Most Since April 2020