Builder Confidence Down on Rising Material Prices, Upsurge in COVID-19 Cases

The National Association of Home Builders said its Housing Market Index fell by three points in January, hamstrung by rising material costs led by a huge upsurge in lumber prices along with a resurgence of the coronavirus across much of the nation.

The NAHB/Wells Fargo HMI fell to 83 in January. All three major HMI indices fell in January. The HMI index gauging current sales conditions dropped two points to 90; the component measuring sales expectations in the next six months fell two points to 83; and the gauge charting traffic of prospective buyers decreased five points to 68.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell six points to 76, the Midwest was up two points to 83, the South fell one point to 86 and the West posted a one-point loss to 95.

Despite the drop, NAHB said builder sentiment remains at a historically strong level.

“Despite robust housing demand and low mortgage rates, buyers are facing a dearth of new homes on the market, which is exacerbating affordability problems,” said NAHB Chairman Chuck Fowke. “Builders are grappling with supply-side constraints related to lumber and other material costs, a lack of affordable lots and labor shortages that delay delivery times and put upward pressure on home prices. They are also concerned about a changing regulatory environment.”

“While housing continues to help lead the economy forward, limited inventory is constraining more robust growth,” said NAHB Chief Economist Robert Dietz. “A shortage of buildable lots is making it difficult to meet strong demand and rising material prices are far outpacing increases in home prices, which in turn is harming housing affordability.”

Last week, the Mortgage Bankers Association’s Builder Application Survey data for December reported mortgage applications for new home purchases edged up by 0.2 percent from November but improved by 42.2 percent from a year ago.