Insights 
VT 
The US NAHB housing market index for May recorded 34, falling short of the expected 40.
Single-family home sentiment decreased to 37 from the previous 45, while prospective buyers’ interest dropped to 23 from 25 prior. Sales expectations also declined slightly, from 43 to 42.
Lowest Sentiment Levels
These figures match the lowest sentiment levels seen since 2022, and, excluding the pandemic period, it is the weakest since 2012. The western region of the United States is experiencing notable softness in the housing market.
Despite the 5% increase in US 30-year yield, spending on home-related goods displayed resilience. Today’s retail sales report indicated strong consumer activity in this sector.
We’re seeing a glaring weakness beginning to surface in the US housing market, particularly among home builders and prospective buyers. That NAHB sentiment reading—slipping to 34 in May—marks a sharp downshift and aligns with readings last seen during more stressed economic cycles. For context, the figure was expected to sit at 40, and a drop like this generally reflects growing unease among those directly responsible for new construction.
Breaking it down, builder views on current single-family home sales dropped to 37 from 45, which points to reduced demand or concerns over future affordability. The outlook for future sales came in at 42, barely a tick lower than the previous 43, but still a backward move. Perhaps even more telling is the interest from potential buyers, now slipping to 23—quite weak, no matter how one tries to frame it.
Housing Market Tension
Interestingly, while housing indicators appear fragile, consumer activity related to housing goods continues to hold up. We’ve just received the latest retail sales data, showing steadiness in demand for items like appliances, furniture, and other home expenditures. That’s happening even against the backdrop of a recent rise in the 30-year yield, which has jumped by about 5%. Yields moving higher tend to apply upward pressure on mortgage rates, directly impacting affordability for most types of home financing.
As far as implications go, there’s a tension building between the behaviour of consumers and the growing caution from builders. On one hand, households are still active buyers of goods tied to housing; on the other, those facilitating supply are pulling back. That mismatch should not be ignored. It signals that conditions may shift suddenly, particularly if borrowing costs stay elevated or rise further.
We’re seeing indications of regional weakness, especially across the western part of the country. This matters because that region often responds more sensitively to interest rate movements and broader credit trends. Put simply, if builders and buyers there are becoming more hesitant, others may follow.
When we examine this through the lens of expected forward pricing behavior, the weakening sentiment from those directly involved in supply should weigh on any sustained bullish expectations. The resilience in goods-related sectors might keep broader consumer expectations afloat in the short-term, but without strengthening fundamentals in the housing market, sustained price expansion becomes increasingly unlikely.
In the coming weeks, further attention will need to be paid to builder backlogs and active listings from previous months. Slower movement there could confirm that supply is outpacing matched demand—even if just temporarily. That would feed into wider asset repricing and change positioning metrics meaningfully.
From our side, we’re anticipating a divergence in rate sensitivity among different market segments. While retail resilience might offer a buffer, building and housing commitments are far more rate-sensitive—and we see little evidence that financing costs are coming down just yet. The yield curve remains distorted, and inflation concerns are far from resolved.
These data points, taken together, shift the near-term narrative from one of balanced conditions to one that favours a more cautious positioning—especially in sectors with long-duration exposure or direct correlations to lending terms.
