The homebuilder confidence index rose to 65 in July, according to the National Association of Homebuilders, as a dovish Federal Reserve is expected to reduce interest rates later this month and potentially two more times by the end of 2019. But while confidence has increased, homebuilders are still facing headwinds related to land, labor and tariffs, all of which are having a negative impact on buying, particularly for first-time home buyers.
The reduction in interest rates has been a trend since the fourth quarter of 2018, when homebuilders feared that rising rates would be the final straw that ended this cycle.
Although buyer traffic recovered a bit in June, demand has not picked up. Lower interest rates have historically driven more foot traffic and first-time buyers to the market, yet buyer traffic still lags 2018. After several months of overly optimistic expectations earlier this spring, the continued slowdown has brought homebuilder expectations for future sales more in line with current sales.