Builder Sentiment Down as Lumber Costs Continue to Rise
The rising price of lumber alone has added around $24,000 to the price of a new home.
Residential builder sentiment fell two points in March as material costs—particularly for lumber—tick up.
The latest NAHB/Wells Fargo Housing Market Index shows that builder confidence for newly built single-family homes fell two points to 82 in March, down from a peak of 90 in November. This is despite high buyer traffic and strong demand. Regionally, the West remained at the top at 90 (a drop of three points over the month), followed by the South at 82 (a two-point decrease) and the Northeast (up two points) and Midwest (down one point) at 80.
While supply for single family homes is expected to increase this year, the rising price of lumber alone has added around $24,000 to the price of a new home, according to NAHB Chief Economist Robert Dietz. And while mortgage interest rates are still at historical lows, they’ve also risen about 30 basis points over the last month, he said.
The index gauging current sales conditions also dropped three points to 87, and the index measuring sales expectations over the next six months increased three points to 83. The flow of prospective buyers held firm.
Lumber prices have been volatile since last fall, prompting some members of Congress to call on President Joe Biden to intervene.
“Though builders continue to see strong buyer traffic, recent increases for material costs and delivery times, particularly for softwood lumber, have depressed builder sentiment this month,” said NAHB Chairman Chuck Fowke in a statement. “Supply shortages and high demand have caused lumber prices to jump more than 200% since last April. Policymakers must address building material supply chain issues to help the economy sustain solid growth in 2021.”