A report released by the National Association of Home Builders on Wednesday unexpectedly showed a continued deterioration in U.S. homebuilder confidence in the month of June.
The report said the NAHB/Wells Fargo Housing Market Index fell to 43 in June after slumping to 45 in May, while economists had expected the index to come in unchanged.
With the unexpected decease, the housing market dropped to its lowest level since hitting 37 last December.
\"Persistently high mortgage rates are keeping many prospective buyers on the sidelines,\" said NAHB Chairman Carl Harris. \"Home builders are also dealing with higher rates for construction and development loans, chronic labor shortages and a dearth of buildable lots.\"
The continued slide by the headline index reflected declines by all three component indices, which all came in below the key threshold of 50 for the first time since December 2023.
The index charting current sales conditions in fell to 48 in June from 51 in May, the component measuring sales expectations in the next six months slumped to 47 in June from 51 in May and the gauge charting traffic of prospective buyers dipped to 28 in June from 30 in May.
\"We are in an unusual situation because a lack of progress on reducing shelter inflation, which is currently running at a 5.4% year-over-year rate, is making it difficult for the Federal Reserve to achieve its target inflation rate of 2%,\" said NAHB Chief Economist Robert Dietz.
\"The best way to bring down shelter inflation and push the overall inflation rate down to the 2% range is to increase the nation\'s housing supply,\" he added. \"A more favorable interest rate environment for construction and development loans would help to achieve this aim.\"
On Thursday, the Commerce Department is scheduled to release a separate report on new residential construction in the month of May.
Economists expect housing starts to climb by 0.7 percent to an annual rate of 1.370 million, while building permits are expected to increase by 0.7 percent to an annual rate of 1.450 million.