Builder Confidence Slips Again as Housing, Manufacturing Show Signs of Strain — Evening Brief – 06.15.26
Builder confidence is backsliding again, underscoring how higher rates and rising costs are weighing on housing just as other corners of the real economy show a patchier backdrop. The latest readings on homebuilder sentiment, regional manufacturing and industrial production all point to an expansion that’s still intact but under increasing strain.
The National Association of Home Builders/Wells Fargo Housing Market Index, a key gauge of builder confidence for newly built single-family homes, fell to 35 in June from 37 in May, missing expectations for 36. Sentiment has now been stuck below 40 for 14 straight months, a run of pessimism not seen since the foreclosure crisis of 2011–2012.
Rising material costs, elevated mortgage rates and persistent affordability challenges remain the main headwinds. About 35% of builders cut prices in June, up from 32% in May, with the average reduction steady at 6%. Sales incentives also ticked higher, used by 62% of builders versus 61% previously. Within the index, current sales conditions slipped two points to 38, future sales expectations held at 45, and prospective buyer traffic stayed at a weak 25.
Manufacturing signals were also softer. The New York Fed’s Empire State Manufacturing Index dropped to 5.7 in June from 19.6, well below consensus. New orders (3.5) and shipments (8.6) remained positive but decelerated sharply, inventories fell back to 0.0, and firms reported continued pressure on supply availability and delivery times. Employment grew for a fifth straight month, and both prices paid and prices received stayed elevated, with businesses indicating they expect to raise prices over the next six months.
Industrial production, meanwhile, edged up just 0.1% in May, a sharp slowdown from April’s revised 0.9% gain. Manufacturing output was flat versus expectations for modest growth. Construction output provided a bright spot, rising 1.1% after a 0.3% decline, while consumer goods production fell 0.5% following a strong April. Mining activity rose 1.3%, utilities output slipped 0.4%, and capacity utilization ticked up to 76.2%, matching forecasts but still below long-run norms.