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Builder confidence jumps, despite crazy lumber prices

Lumber futures have surged more than 60% this year

Builder confidence rose one point to 83 for newly built single-family homes in April, according to the latest National Association of Home Builders (NAHB) and Wells Fargo Housing Market Index (HMI) report.

Builder confidence has not risen above 84 so far in 2021, after reaching 90 in November and falling to 86 in December.

The index gauging current sales conditions also increased one point, to 88, and the gauge charting traffic of prospective buyers posted a three-point gain to 75. However, the component measuring sales expectations in the next six months fell two points to 81, as many homebuyers are expecting rising mortgage rates and low inventory to sting.

“Housing demand appears to be unwavering for now, as buyer traffic reached its highest level since November,” said NAHB Chief Economist Robert Dietz. “NAHB’s forecast is for ongoing growth in single-family construction in 2021, albeit at a lower growth rate than realized in 2020.”

Sequentially, builder confidence fell in the Northeast to 84 in April from 86 in March. The Midwest also fell from 78 to 75. The South and West both gained points from March, up from 82 to 84 and 88 to 92, respectively.

Builders are still handcuffed by high material cost and low lumber inventory throughout the country, said NAHB Chairman Chuck Fowke. And Dietz said that higher lumber prices are adding about $24,000 to the cost of a new house.

But the pandemic hit the lumber industry hard – approximately 6,000 jobs were lost as a result of the ensuing economic turmoil. Lumber futures have surged more than 60% to record highs in 2021. Most analysts don’t expect price declines until late 2021, dinging builder confidence.

“Though builders are seeking to keep home prices affordable in a market in need of more inventory, policymakers must find ways to increase the supply of building materials as the economy runs hot in 2021,” he said.

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