NAHB: Builder confidence drops again on materials costs, supply-chain woes

by John Yellig

The rising cost of materials and shortages in the supply chain pushed builder confidence down another point in July after it fell two points in June, despite strong buyer demand, the National Association of Home Builders reported, citing the latest NAHB/Wells Fargo Housing Market Index.

July’s reading of 80 was down one point from June, but it still signaled strong demand for housing, the NAHB said in a press release.

“Builders are contending with shortages of building materials, buildable lots and skilled labor, as well as a challenging regulatory environment,” NAHB chief economist Robert Dietz said in a press release. “This is putting upward pressure on home prices and sidelining many prospective homebuyers, even as demand remains strong in a low-inventory environment.”

The index’s measure of current sales conditions fell one point to 86, and the six-month sales-expectations measurement rose two points to 81. The buyer-traffic component fell six points to 65.

Regionally, the three-month moving average of the index held steady in the South at 85, while the West slid two points to 82, the Northeast dropped four points to 75, and the Midwest slid one point to 71.

“Builders continue to grapple with elevated building-material prices and supply shortages, particularly the price of oriented strand board, which has skyrocketed more than 500% above its January 2020 level,” NAHB Chairman Chuck Fowke said. “We are grateful that the White House heeded our urgent plea to hold a building-materials meeting with interested stakeholders on July 16 to seek solutions to end production bottlenecks that have harmed housing affordability.”

The NAHB/Wells Fargo survey measures builder perceptions of current single-family home sales, as well as 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.” The results are then used to calculate a seasonally adjusted index in which any number over 50 indicates that more builders view conditions as good than poor.

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