Soaring prices for lumber and land lower homebuilders’ confidence

Just two months ago, home builders had never been happier. Buyer demand, driven by the pandemic-induced desire for larger and newer homes in the suburbs, had homebuilders sentiment at an all-time high. Today, the rising cost of building homes is making builders less optimistic.

Builder confidence in the single-family home market fell 3 points in January to 83, according to the NAHB / Wells Fargo Housing Market Index. Anything over 50 is considered positive. Two months ago, the index hit a record high of 90. In January 2019, before the pandemic hit, it was 75.

“Builders are grappling with supply-side constraints related to lumber and other material costs, a lack of affordable lots, and labor shortages that are delaying delivery times and putting pressure on rising home prices, ”said NAHB President Chuck Fowke, a builder from Tampa, Florida. .

Across all three components of the index, current selling conditions fell 2 points to 90. Selling expectations over the next six months fell 2 points to 83 and buyer traffic fell 5 points to 68.

“As housing continues to help drive the economy forward, limited inventory is hampering more robust growth,” said NAHB Chief Economist Robert Dietz. “A shortage of building land makes it difficult to meet high demand, and rising materials prices far outweigh increases in house prices, hurting housing affordability.

On a three-month moving average for regional HMI scores, sentiment in the Northeast fell 6 points to 76. It increased 2 points to 83 in the Midwest. In the South, sentiment dropped 1 point to 86 and in the West it dropped by 1 point to 95.