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Homebuilder confidence falls to lowest level since August

Rising material prices, supply chain shortages contribute to dip

Homebuilder confidence fell to its lowest level since August 2020, according to the latest National Association of Home Builders (NAHB) and Wells Fargo Housing Market Index (HMI) report.

Rising material prices and supply chain shortages — specifically, the declining availability of softwood lumber and other building materials — contributed to confidence falling two points to 81 for newly built single-family homes in June, said Chuck Fowke, NAHB chairman.

 “These higher costs have moved some new homes beyond the budget of prospective buyers, which has slowed the strong pace of home building,” Fowke said. “Policymakers need to focus on supply-chain issues in order to allow the economic recovery to continue.”

The index gauging current sales conditions fell two points to 86, as did the gauge charting sales expectations in the next six months to 79. The gauge charting traffic of prospective buyers dropped two points as well, to 71.

The effects of skyrocketing lumber prices have reached the far corners of the homebuilding industry, hindering everything from appliance and basic building material prices to shipping times. Robert Dietz, NAHB chief economist, noted these supply-constraints are resulting in insufficient appraisals and making it more difficult for builders to access construction loans.

“And while builders have adopted a variety of business strategies, including price escalation clauses to deal with scarce building materials, labor and lots, unavoidable increases for new home prices are pushing some buyers to the sidelines,” Dietz said.

HousingWire reported back in March that lumber prices alone more than quadrupled since April 2020, to an astonishing $1,500 per thousand board feet. These days, lumber alone is adding nearly $36,000 to the final price of a new build.

David Logan, NAHB senior economist and director of tax and trade policy analysis, said the continued distribution of the multiple COVID-19 vaccines is key to a return of affordable lumber and building material prices and shorter delivery times.

“Really, it’s going to take the working share of the population getting vaccinated and back to work for things to really improve,” Logan said.

Regionally, homebuilder confidence in the South rose one point to 85, while the West remained unchanged at 90. The Northeast and Midwest both saw significant drops of four and three points, respectively, to 82 and 75.

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