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Builder Confidence Rises as High Demand Offsets Higher Costs

HMI February 2021

Strong buyer demand helped offset supply chain challenges and a surge in lumber prices as builder confidence in the market for newly built single-family homes inched up one point in February, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index

"Lumber prices have been steadily rising this year and hit a record high in mid-February, adding thousands of dollars to the cost of a new home and causing some builders to abruptly halt projects at a time when inventories are already at all-time lows," says NAHB Chairman Chuck Fowke. "Builders remain very focused on regulatory and other policy issues that could price out households seeking new homes in a tight market this year."

"Demand conditions remain solid due to demographics, low mortgage rates and the suburban shift to lower cost markets, but we expect to see some cooling in growth rates for residential construction in 2021 due to cost factors, supply chain issues and regulatory risks," says Robert Dietz, NAHB chief economist. "Some builders are at capacity and may not be able to expand production due to these headwinds."

The HMI index gauging current sales conditions held steady at 90, while the component measuring sales expectations in the next six months fell three points. The gauge charting traffic of prospective buyers rose four points.