Rising Material Challenges, Declining Builder Sentiment

Material Costs
Published

Rising material prices and supply chain shortages resulted in builder confidence dipping to its lowest level since August 2020. The latest NAHB/Wells Fargo Housing Market Index (HMI) released today 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,” said NAHB Chairman Chuck Fowke. “These higher costs have moved some new homes beyond the budget 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,” said NAHB Chief Economist Robert Dietz. “Moreover, these supply-constraints are resulting in insufficient appraisals and making it more difficult for builders to access construction loans.”

Derived from a monthly survey that NAHB has been conducting for 35 years, the 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.

All three of the major HMI indices posted declines in June:

  • current sales conditions fell two points to 86;
  • sales expectations in the next six months posted a two-point decline to 79; and
  • 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.

Single-family home builders are invited to join the exclusive group of NAHB members who participate each month in the Housing Market Index survey. To begin receiving the monthly HMI surveys, please submit this form.

Subscribe to NAHBNow

Log in or create account to subscribe to notifications of new posts.

Log in to subscribe

Latest from NAHBNow

Education | Certified Aging-in-Place Specialist (CAPS)

Apr 24, 2025

Expand Your Business with Aging-in-Place Marketing and Design Tools

Americans are living longer and more active lives resulting in a need to change the way we design homes for long-term family sustainability. Numerous products and services are reinventing themselves for the latest wave of baby boomer retirees, and chief among them is NAHB’s CAPS (Certified Aging-in-Place) construction credential.

Safety

Apr 24, 2025

Fall Protection in Focus During Nationwide Stand-Down

OSHA’s annual National Safety Stand-Down to prevent falls in construction begins Monday, May 5. Use valuable resources from OSHA and NAHB to educate workers on fall risks and help avoid preventable injuries.

View all

Latest Economic News

Economics

Apr 23, 2025

New Home Sales Rise in March

A modest decline in mortgage rates and lean existing inventory helped boost new home sales in March even as builders and consumers contend with uncertain market conditions.

Economics

Apr 22, 2025

The Power of Women in the Workforce

Over the past 125 years, women have played a crucial and multifaceted role in the labor force. Increasing women’s participation in the workforce is not only essential for individual and family well-being, but also contributes significantly to overall labor force participation rates and economic growth by adding more workers and enhancing overall productivity.

Economics

Apr 21, 2025

Who Influences the Purchasing of Building Products?

In a previous post, NAHB analyzed where builders and remodelers purchased products, regardless of who ultimately purchases them (themselves or subcontractors). In this post, the question shifts to who is most often responsible for the choice of particular products.