Builder confidence in the market for newly built single-family homes fell by two points in March, down to a reading of 82 in the latest NAHB/Wells Fargo Housing Market Index. The NAHB attributes this drop in sentiment to the meteoric rise in lumber prices, as well as ongoing material shortages and a 30-basis point rise in interest rates.
“Though builders continue to see strong buyer traffic, recent increases for material costs and delivery times, particularly for softwood lumber, have depressed builder sentiment this month,” says NAHB chairman Chuck Fowke. “Supply shortages and high demand have caused lumber prices to jump about 200% since last April. Policymakers must address building material supply chain issues to help the economy sustain solid growth in 2021.”
The NAHB/Wells Fargo HMI is based on a monthly survey of builders, which asks them to gauge current home sales performance, expected performance over the next six months, and traffic of prospective buyers. In each category, a seasonally adjusted score over 50 indicates that more builders view conditions as good than as poor.
The index gauging current sales conditions fell three points to 87 from February to March. The index measuring sales expectations in the net six months rose three points to 83, while the index of buyer traffic remained unchanged at 72.
At the regional level, the three-month moving average HMI rose two points to 80 in the Northeast. The Midwest three-month moving average HMI fell one point to 80, the South fell two points to 82, and the West fell three points to 90.
“Builder confidence peaked at a level of 90 last November and has trended lower as supply-side and demand-side factors have trimmed housing affordability,” says NAHB chief economist Robert Dietz. “While single-family home building should grow this year, the elevated price of lumber is adding approximately $24,000 to the price of a new home. And mortgage interest rates, while historically low, have increased about 30 basis points over the last month. Nonetheless, the lack of resale inventory means new construction is the only option for some prospective home buyers.”
