Builder Confidence is Stable while Concerns Regarding Building Materials Linger
The latest NAHB/Wells Fargo Housing Market Index in May shows that builder confidence in the market for newly built single-family homes is unchanged from April.
Builder confidence held stable in May, despite growing concerns over the price and availability of most building materials, including lumber. The latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) shows that builder confidence in the market for newly built single-family homes is 83 in May, unchanged from April.
“Builder confidence in the market remains strong due to a lack of resale inventory, low mortgage interest rates and a growing demographic of prospective home buyers,” said Chuck Fowke, NAHB chairman and a custom home builder from Tampa, Fla. “However, first-time and first-generation home buyers are particularly at risk for losing a purchase due to cost hikes associated with increasingly scarce material availability. Policymakers must take note and find ways to increase production of domestic building materials, including lumber and steel, and suspend tariffs on imports of construction materials.”
“Low interest rates are supporting housing affordability in a market where the cost of most materials is rising,” said Robert Dietz, chief economist for NAHB. “In recent months, aggregate residential construction material costs were up 12 percent year-over-year, and our surveys suggest those costs are rising further. Some builders are slowing sales to manage their own supply-chains, which means growing affordability challenges for a market in critical need of more inventory.”
With labor and lot availability a challenge in many markets, Dietz cautioned that “home buyers should expect rising prices throughout 2021 as the cost of materials, land and labor continue to rise.”
Derived from a monthly survey that NAHB has been conducting for 35 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair,” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average,” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
The HMI index gauging current sales conditions held steady at 88, and the gauge charting sales expectations in the next six months rose one point to 81. The component measuring traffic of prospective buyers fell one point to 73.
Looking at the three-month moving averages for regional HMI scores, the South rose one point to 84, and the West held steady at 90. The Northeast fell four points to 82, and the Midwest posted a three-point drop to 75.
Additional details are available at www.nahb.org/hmi and www.nahb.org/news-and-economics/housing-economics-plus.
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