Builder Confidence Edges Lower as Material Challenges Persist

Strong buyer demand partially offset building material supply-side challenges, regulation and labor as builder confidence in the market for newly built single-family homes inched down one point to 80 in July, the National Association of Home Builders/Wells Fargo Housing Market Index reported.

“Builders continue to grapple with elevated building material prices and supply shortages, particularly the price of oriented strand board, which has skyrocketed more than 500 percent above its January 2020 level,” said Chuck Fowke, a home builder from Tampa, Fla.

NAHB Chief Economist Robert Dietz said builders must contend with shortages of building materials, buildable lots and skilled labor as well as a challenging regulatory environment. “This is putting upward pressure on home prices and sidelining many prospective home buyers even as demand remains strong in a low-inventory environment,” he said.

The NAHB/Wells Fargo Housing Market Index gauges builder’s 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 then calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

The three major HMI indices were mixed in June, Wells Fargo and NAHB reported. The HMI index gauging current sales conditions fell one point to 86, the component measuring traffic of prospective buyers dropped six points to 65 and the gauge charting sales expectations in the next six months posted a two-point gain to 81.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell four points to 75, the Midwest moved one-point lower to 71 and the West posted a two-point decline to 87. The South held steady at 85.