Homebuilder confidence slips to 10-month low as rising material costs weigh

Homebuilder confidence slipped to its lowest level since August 2020 as rising material costs weighed on sentiment. 

Data released Tuesday showed the National Association of Homebuilder’s/Wells Fargo Housing Market Index in June fell two points to 81. Any reading above 80 signals strong demand.

The index can range from 0 to 100 with any print over 50 considered positive sentiment.

SPIKE IN CURRENT MORTGAGE RATES UNLIKELY TO DERAIL HOUSING MARKET

"Higher costs and declining availability for softwood lumber and other building materials pushed down builder sentiment in June," said NAHB Chairman Chuck Fowke. "These higher costs have moved some new homes beyond the budget of prospective buyers, which has slowed the strong pace of home building."

Lumber prices had soared as much as 316% since the start of 2020 as the COVID-19 pandemic caused supply chain disruptions and resulted in strong demand for building projects. 

All three of the major indexes within the report declined two points in June. 

The index for current sales conditions fell to 86 while the component measuring sales expectations for the next six months slipped to 79 and the gauge for traffic of prospective buyers slid to 71.

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The three-month average for builder sentiment rose one point to 85 in the South. It fell one point to 90 in the West, three points to 72 in the Midwest and five points to 78 in the Northeast.

Homebuilders could find some relief as lumber prices have fallen 42% from their May 7 high amid improved rail service out of Canada, slowing sales at home-improvement stores, and the easing of labor shortages at lumber mills.