Homebuilder sentiment drops to lowest in a year as buyers face sticker shock

The price of lumber has fallen sharply in recent months, but that has apparently not been enough to relieve home builders.

Sentiment among builders of single-family homes fell five points to 75 in August on the National Association of Home Builders (NAHB) / Wells Fargo Housing Market Index (HMI).

Anything above 50 is considered positive, but it is the lowest reading since July 2020. The index stood at 78 last August.

Across the three components of the index, current selling conditions fell 5 points to 81 and traffic from potential buyers also fell 5 points to 60. Selling expectations over the next six months remained unchanged at 81.

Builders are grappling with continuously rising costs for materials as well as skilled labor. This drives up the price of newly built homes and clearly affects demand.

More than 56% of new and existing homes sold between early April and late June were affordable for families earning the median U.S. income of $ 79,900. This is a sharp drop from 63.1% of homes sold in the first quarter of 2021 and the lowest level of affordability since the NAHB’s revised series began in the first quarter of 2012.

“Some potential buyers are experiencing sticker shock due to the higher construction costs,” said NAHB President Chuck Fowke, a home builder from Tampa, Florida. “Policymakers need to find long-term solutions to supply chain problems.”

Lumber prices have dropped significantly since peaking earlier this year. Lumber fell 4.91% on Monday to $ 470.90, its lowest level since July 6, 2020. Lumber is down 72.48% from its intraday high of $ 1,711.2 on May 10.

“As lumber prices improve, the price and availability of other building materials remains a challenge. These materials include flooring, drywall, appliances and windows, said Robert Dietz, NAHB chief economist.

Aggregate prices for residential building materials rose 13% in the first six months of 2021, according to NAHB analysis of Producer Price Index data.

“While demographics and interest in buying homes remain strong, higher costs and issues with access to materials have driven home construction levels down and even put the brakes on some sales of homes. new homes, ”added Dietz, noting that he expects production bottlenecks over the next few months and the market should return to more normal conditions.

Regionally, based on the three-month moving averages of regional HMI scores, sentiment in the Northeast fell by one point to 74 and in the Midwest by 2 points to 68. In the South, sentiment in the builders fell 3 points to 82 and the West fell 2 points. to 85.