Builder confidence holds steady in May

Despite concerns over high lumber prices and the availability of materials, builder sentiment is holding steady.

The latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) shows that builder confidence in the market for newly-built single-family homes is 83 in May, unchanged from April.

Builder confidence in the market remains strong due to a lack of resale inventory, low mortgage interest rates, and a growing demographic of prospective home buyers, the NAHB said.  

However, first-time and first-generation home buyers are particularly at risk for losing a purchase due to cost hikes associated with increasingly scarce material availability. 

The NAHB said that policymakers must take note and find ways to increase the production of domestic building materials, including lumber and steel, and suspend tariffs on imports of construction materials.

In recent months, aggregate residential construction material costs were up 12% year-over-year. Recent surveys from the NAHB also suggest that prices will continue to climb.

Additionally, some home builders are slowing sales in order to manage their own supply chains. The result is rising affordability challenges during a period when more housing inventory is needed.

A lack of labor and lot availability is likely to continue pushing up the prices of new homes, the NAHB noted.

The HMI index gauging current sales conditions held steady at 88 and the gauge charting sales expectations in the next six months rose one point to 81. The component measuring traffic of prospective buyers fell one point to 73.

Looking at the three-month moving averages for regional HMI scores, the South rose one point to 84 and the West held steady at 90. The Northeast fell four points to 82 and the Midwest posted a three-point drop to 75.

The latest HMI tables are available here.