Homebuilder Sentiment Edges Lower in June

U.S. homebuilders are feeling slightly less optimistic, a shift that follows a big drop in sales of new homes in April.

The National Association of Home Builders/Wells Fargo builder sentiment index released Thursday declined to 67 this month. That’s down two points from a downwardly revised reading of 69 in May.

Readings above 50 indicate more builders view sales conditions as good rather than poor. The index has been above 60 since September.

The June index fell short of analyst predictions, which called for a reading of 69, according to FactSet.

Readings gauging builders’ view of sales now and over the next six months also fell from last month. A measure of traffic by prospective buyers also edged lower.

Sales of new homes registered the biggest monthly drop in more than two years in April, sliding to a seasonally adjusted annual rate of 569,000. The April decline followed a sharp increase in March. May new-home sales data are due out next week.

Despite the April sales slowdown, homebuilders have been benefiting this year from increased demand for homes, which has sales running ahead of last year’s pace.

More Americans are in a buying mood as job security has improved with low unemployment. But even with construction running ahead of last year’s pace, the supply of new and existing homes across much of the country remains tight, which limits sales.

Construction of new homes fell for a second straight month in April, pushing activity to a seasonally adjusted annual rate of 1.17 million units. That’s the lowest point in five months.

Builders continue to grapple with a shortage of skilled construction workers and land parcels cleared for home construction.

“As the housing market strengthens and more buyers enter the market, builders continue to express their frustration over an ongoing shortage of skilled labor and buildable lots that is impeding stronger growth in the single-family sector,” said Robert Dietz, the NAHB’s chief economist.

This month’s builder index was based on 252 respondents.

A measure of current sales conditions for single-family homes fell two points to 73, while an outlook for sales over the next six months slid two points to 76. Builders’ view of traffic by prospective buyers declined two points to 49.