Builder Confidence Slips As Lumber Prices Soar

Dated: 06/21/2018

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WASHINGTON – June 18, 2018 – Builder confidence in the market for newly-built single-family homes fell two points to 68 in June on the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). NAHB says the decline was due in large part to sharply elevated lumber prices, but overall sentiment remains on solid footing.

"Builders are optimistic about housing market conditions as consumer demand continues to grow," says NAHB Chairman Randy Noel. "However, builders are increasingly concerned that tariffs placed on Canadian lumber and other imported products are hurting housing affordability. Record-high lumber prices have added nearly $9,000 to the price of a new single-family home since January 2017."

"Improved economic growth, continued job creation and solid housing demand should spur additional single-family construction in the months ahead," says NAHB Chief Economist Robert Dietz. "However, builders do need access to lumber and other construction materials at reasonable costs in order to provide homes at competitive price points – particularly for the entry-level market where inventory is most needed."

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index 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.

In June's survey, all three HMI indexes inched down a single point. The index measuring current sales conditions fell to 75, the component gauging expectations in the next six months dropped to 76, and the metric charting buyer traffic edged down to 50.

Looking at the three-month moving averages for regional HMI scores, the Northeast rose two points to 57, while the West and Midwest remained unchanged at 76 and 65, respectively. The South fell one point to 71.

Source: Florida Realtors

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