Builder Confidence Slips Two Points as Lumber Prices Soar

Builder confidence in the market for newly built single-family homes fell two points to 68 in June, the National Association of Home Builders reported yesterday.

The NAHB/Wells Fargo Housing Market Index said 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.

Three-month moving regional averages saw the Northeast rise two points to 57 while the West and Midwest remained unchanged at 76 and 65, respectively. The South fell one point to 71.

NAHB Chief Economist Robert Dietz said the decline was due in large part to sharply elevated lumber prices, although sentiment remains on solid footing.

“Improved economic growth, continued job creation and solid housing demand should spur additional single-family construction in the months ahead,” Dietz said. “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.”

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said since January 2017, higher lumber costs added nearly $9,000 to the price of a new home. “Lumber prices have ebbed slightly more recently, which may boost prospects for the second half of 2018,” he said.

Dietz agreed, although he noted builders are increasingly concerned that tariffs placed on Canadian lumber and other imported products are hurting housing affordability.