BUILDER SENTIMENT DROPS AS MATERIAL CHALLENGES CONTINUE

The NAHB /Wells Fargo Housing Market Index continues its decline, down to its lowest level since August 2020.

Ongoing supply and material price challenges have driven the latest NAHB/Wells Fargo Housing Market Index down two points to 81 in June, the lowest reading for the index since August 2020.

Despite this decline, the NAHB notes that a reading above 80 still indicates very strong demand despite a lack of inventory. Any index number over 50 indicates that more builders view industry conditions as good than as poor.

“Higher costs and declining availability for softwood lumber and other building materials pushed down builder sentiment in June,” says 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. Policymakers need to focus on supply-chain issues in order to allow the economic recovery to continue.”

All three of the major HMI index components posted declines in June. The index gauging current sales conditions fell two points to 86, the index gauging sales expectations in the next six months fell two points to 79, and the component measuring prospective buyer traffic fell two points to 71.

“While builders have adopted a variety of business strategies, including price escalation clauses to deal with scarce building materials, labor, and lots, unavoidable increases for new-home prices are pushing some buyers to the sidelines,” says NAHB chief economist Robert Dietz. “Moreover, these supply constraints are resulting in insufficient appraisals and making it more difficult for builders to access construction loans.”

At the regional level, the three-month moving average HMI for the South rose one point to 85. The West fell one point to 89, the Midwest fell three points to 72, and the Northeast fell five points to 78.

Origination: https://www.builderonline.com/data-analysis/builder-sentiment-drops-as-material-challenges-continue_o