According to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), builder confidence in the newly-built single-family homes market fell two points to in June. Sentiment levels have held at a solid range in the low- to mid-60s for the past five months. The HMI level in May 2019 (66) was the highest level since October 2018 (68).

“While demand for single-family homes remains sound, builders continue to report rising development and construction costs, with some additional concerns over trade issues,” said Greg Ugalde, NAHB chairman and a home builder and developer from Torrington, Conn.

Derived from a monthly survey that NAHB has been conducting for 30 years, the HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

“Despite lower mortgage rates, home prices remain somewhat high relative to incomes, which is particularly challenging for entry-level buyers,” said NAHB Chief Economist Robert Dietz.  “And while new home sales picked up in March and April, builders continue to grapple with excessive regulations, a shortage of lots and lack of skilled labor that are hurting affordability and depressing supply.”

All the HMI indices inched lower in June. The index measuring current sales conditions fell one point to 71, the component gauging expectations in the next six months declined two points to 70 and the metric charting buyer traffic dropped one point to 48.

Looking at the three-month moving averages for regional HMI scores, the Northeast posted a three-point gain to 60 and the Midwest was also up three points to 57. The West held steady at 71 and the South fell a single point to 67, according to the NAHB