Homebuilder Sentiment Down Due to Materials Costs

Posted by Amrock

American homebuilder sentiment declined in June, as rising material costs have added nearly $9,000 to the price of a new single-family home, reports CNBC. The report says U.S. homebuilders are thrilled by an increased demand for housing, but the industry is hindered by rising material costs, particularly the cost of lumber.

Homebuilder sentiment index down to 68

The joint National Association of Home Builders (NAHB) and Wells Fargo Housing Market Index declined two points in June to a reading of 68. While a reading above 50 is considered positive, the index has mostly remained above 70 since December 2017. The most recent decline is said to be due to a spike in material prices.

Material costs of homes up $9,000

“Builders are optimistic about housing market conditions as consumer demand continues to grow,” Randy Noel, chairman of the NAHB and a homebuilder in LaPlace, Louisiana, told the news outlet. “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,” he said.

Canadian lumber tariffs went into effect in 2017, however, the article reports that prices have continued to climb this year. Prices are reportedly 67 percent higher than a year ago, after a slight decline this month from an all-time record high in May, owing to demand.

Affordable materials needed for competitive price points

“Improved economic growth, continued job creation and solid housing demand should spur additional single-family construction in the months ahead,” Robert Dietz, chief economist for NAHB, told the news outlet. “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.”