Builder confidence in the market for new single-family construction dipped two points in June to a reading of 67 on the National Association of Home Builders/Wells Fargo Housing Market Index. May's strong score was revised down one point to 69.
NAHB Chairman Granger MacDonald said in a statement that builder outlook has remained relatively stable so far this year as the market continues its slow recovery.
All three HMI sub-indices slid for the month, with current sales conditions, sales expectations for the next six months and buyer traffic each dropping two points to 73, 76 and 49, respectively. Still, each measure is registering at healthy levels, according to the organization.
The declining confidence levels reported in June reflect builders' mounting frustration with the challenge of finding skilled labor as well as a shortage of lots, limiting their ability to increase operations as demand swells. Additionally, that views on buyer traffic fell below the 50-point breakeven threshold is one indicator that the home-price increases triggered by high demand and short supply are beginning to have an effect on buyer volume.
Builder optimism could pick back up in the coming months, as material price growth cools and construction employment builds momentum. Construction input prices broke their five-month growth streak in May. Meanwhile, the residential sector added 7,100 workers to their payrolls. The month's relief in price growth, along with a boost in employment, stand to ease pressure on builders struggling with already-high material costs and trouble staffing their crews.
A drop in building permit authorizations in April could point to a slowdown in residential construction demand in the coming months. The Commerce Department's upcoming May housing starts report will paint a clearer picture of upcoming residential activity and how that may impact builder confidence.