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News » US » Builders lose confidence as lumber prices soar » published 19 Jun 2018

Builders lose confidence as lumber prices soar

Sharply elevated lumber prices are responsible for a drop in builders’ confidence in the market for newly built single-family homes, new research has found.

Builder confidence in the market fell two points to 68 in June on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The decline was due in large part to the sharply elevated lumber prices, although sentiment remains on solid footing, according to the survey.

“Builders are optimistic about housing market conditions as consumer demand continues to grow,” said National Association of Home Builders (NAHB) chairman Randy Noel. “However, builders are increasingly concerned that tariffs placed on Canadian lumber and other imported products are hurting housing affordability. Record-high lumber prices have added nearly $9,000 to the price of a new single-family home since January 2017.”

NAHB chief economist Robert Dietz added: “Improved economic growth, continued job creation and solid housing demand should spur additional single-family construction in the months ahead. However, builders do need access to lumber and other construction materials at reasonable costs in order to provide homes at competitive price points, particularly for the entry-level market where inventory is most needed.”

The NAHB/Wells Fargo HMI is derived from a monthly survey that NAHB has been conducting for 30 years. It gauges builder perceptions of current single-family home sales and 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’. Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All three HMI indexes inched down a single point in June. The index measuring current sales conditions fell to 75, the component gauging expectations in the next six months dropped to 76, and the metric charting buyer traffic edged down to 50.

Looking at the three-month moving averages for regional HMI scores, the Northeast rose two points to 57 while the West and Midwest remained unchanged at 76 and 65, respectively. The South fell one point to 71.

 

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This article was published on 19 Jun 2018 (last updated on 19 Jun 2018).

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