Homebuilder sentiment matches 2019 high, but outlook weakens

Sentiment among homebuilders rose in August to match its 2019 high as mortgage rates tumbled, though a weaker outlook signaled concern that any gains will be temporary as investors fret about an economic downturn.

The National Association of Home Builders/Wells Fargo Housing Market Index rose one point to 66, according to a report Thursday that exceeded estimates in a Bloomberg survey for an unchanged reading.

Bloomberg

The measures of current sales and buyer traffic hit the highest levels since October, while the sales outlook fell one point. Readings above 50 indicate more builders view conditions as good than poor.

The current-sales component of the index exceeded the sales outlook by three points, indicating more optimism about the present than the future. Developers continue to cope with rising construction costs and shortages of labor and lots, the homebuilders group said.

The report suggested lower interest rates will provide some support to the housing sector without proving a panacea. Data out earlier Thursday showed retail sales rose by more than expected in July but factory output declined.

"While 30-year mortgage rates have dropped from 4.1% down to 3.6% during the past four months, we have not seen an equivalent higher pace of building activity because the rate declines occurred due to economic uncertainty stemming largely from growing trade concerns," NAHB Chief Economist Robert Dietz said in a statement.

"Although affordability headwinds remain a challenge, demand is good and growing at lower price points and for smaller homes."

Sentiment rose in the Northeast, Midwest and West, but it was unchanged in the South.

The Washington-based trade association represents more than 140,000 members in areas ranging from building and remodeling to housing finance.