NAHB: Builder confidence sinks on rising materials costs, supply chain shortages

by John Yellig

The rising cost of materials and shortages in the supply chain pushed builder confidence to its lowest level since August 2020, the National Association of Home Builders reported, citing the latest NAHB/Wells Fargo Housing Market Index. 

June’s reading of 81 was down two points from May, but still signaled strong demand, the NAHB said in a release.

 “Higher costs and declining availability for softwood lumber and other building materials pushed down builder sentiment in June,” NAHB Chairman Chuck Fowke said. “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.” 

The index’s measure of current sales conditions fell two points to 86, and the six-month sales-expectations measurement slid two points to 79. The buyer-traffic component dropped two points to 71. 

Regionally, the three-month moving average of the index rose one point in the South to 85, while the West slid one point to 89, the Northeast dropped five points to 78, and the Midwest slid three points to 72. 

“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,” NAHB chief economist Robert Dietz said. “Moreover, these supply-constraints are resulting in insufficient appraisals and making it more difficult for builders to access construction loans.” 

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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