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

Rising material costs led by a huge upsurge in lumber prices along with a resurgence of the coronavirus across much of the nation pushed builder confidence in the market for newly built single-family homes down three points to 83 in January, according to the latest NAHB/Wells Fargo Housing Market Index. Despite the drop, builder sentiment remains at a 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," says Chuck Fowke, NAHB chairman. "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," says Robert Dietz, NAHB chief economist. "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." 

All three major HMI indices fell in January. The HMI index gauging current sales conditions dropped two points, the component measuring sales expectations in the next six months fell two points and the gauge charting traffic of prospective buyers decreased five points.