By Robert Dietz | Eye On Housing
Rising material prices and supply-chain shortages resulted in builder confidence dipping to its lowest level since August 2020. The latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) shows that builder confidence in the market for newly built single-family homes fell two points to 81 in June. Despite the monthly decline, the reading above 80 is still a signal of strong demand in a housing market lacking inventory.
Higher costs and declining availability for softwood lumber and other building materials pushed down builder sentiment in June. These higher costs have have moved some new homes beyond the budgets of prospective buyers, which has slowed the strong pace of home building. Policymakers need to focus on supply-chain issues in order to allow the economic recovery to continue.
While builders have adopted a variety of business strategies including price escalation clauses to deal with scarce building materials, labor and lots, unavoidable increases for new home prices are pushing some buyers to the sidelines. Moreover, these supply-constraints are resulting in insufficient appraisals and making it more difficult for builders to access construction loans.