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Builder Confidence Hits Lowest Point in 10 Months

NAHB chairman says supply-chain problems, like lumber, created production problems that forced some buyers out of the market when they could no longer afford a new home.

WASHINGTON – Builders’ confidence dropped to a 10-month low in June, according to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). It fell two points to 81, the lowest since August 2020. Still, any number above 50 represents general optimism about the market.

NAHB largely blames problems with the supply chain for the decline, in part because it priced some buyers out of the market.

“Higher costs and declining availability for softwood lumber and other building materials pushed down builder sentiment in June,” says NAHB Chairman Chuck Fowke, a custom home builder from Tampa. “These higher costs have moved some new homes beyond the budget of prospective buyers, which has slowed the strong pace of home building.”

“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,” says NAHB Chief Economist Robert Dietz. In addition, “these supply-constraints are resulting in insufficient appraisals and making it more difficult for builders to access construction loans.”

In the release announcing the latest index, Fowke also pushed lawmakers to “focus on supply-chain issues in order to allow the economic recovery to continue.”

All three of the major HMI indices that make up the complete index posted declines in June. The index gauging current sales conditions fell two points to 86, the gauge charting sales expectations over the next six months posted a two-point decline to 79, and the component measuring traffic of prospective buyers dropped two points to 71.

Looking at the three-month moving averages for regional HMI scores, the South rose one point to 85, the West fell one point to 89, the Midwest dropped three points to 72 and the Northeast posted a five-point decline to 78.

The NAHB/Wells Fargo HMI gauges builder 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 are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

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