US home builder sentiment drops again in July as affordability crisis deepens

The mood among American home builders just got a little darker. The NAHB/Wells Fargo Housing Market Index fell two points to 34 in July, down from a revised 36 in June, extending what has become the longest stretch of sub-40 readings since 2012.

That 40 level matters. It’s the line that separates builders who generally feel good about the market from those who don’t. The index has now spent 15 consecutive months below it.

The numbers paint a bleak picture

Every single sub-component of the index declined. Current sales conditions dropped to 37. Sales expectations for the next six months slipped to 43. And prospective buyer traffic fell to a notably weak 23.

The culprits are familiar by now: high mortgage rates, rising material and land costs, and a persistent shortage of skilled labor.

Builders aren’t just sitting around waiting for conditions to improve, though. They’re cutting prices. Some 37% of builders reported offering price reductions in July, with the average discount coming in at 6%.

Why buyers are staying on the sidelines

NAHB officials pointed to a familiar dynamic. Potential buyers are essentially frozen, waiting for some combination of lower interest rates, clearer inflation trends, and generally improved economic conditions before committing to what is, for most people, the largest financial decision of their lives.

The July reading also came in below the consensus forecast of 35.

For context, the last time the NAHB index spent this long below 40 was during the slow, painful crawl out of the 2008 financial crisis.

What this means for investors and risk assets

Bitcoin has been trading in the $60K to $64K range without showing any particular correlation to the housing data.

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