Homebuilder sentiment improves after sharp drop in lumber prices

Homebuilder sentiment improves after sharp drop in lumber prices

Home builders in the single family construction market are feeling better as lumber prices are so high and buyer demand is on the rise.

According to the National Association of Home Builders / Wells Fargo Housing Market Index, homebuilder sentiment rose 76 points in September. This is the first increase in three months.

Sentiment was at 83 in September last year, then set a record 90 last November. This dropped dramatically as lumber prices rose and supply chain issues hampered construction.

NAHB President Chuck Fowke said: “September numbers show stagnation as the cost of some building materials poses challenges, especially softwood lumber. However, delivery times are lengthened and chronic labor shortages in construction are expected to continue. Hopefully the overall labor market improves.

Lumber prices have risen to over $ 1,600 per thousand board feet this spring, but the recent price was around $ 400.

Across the three components of the index, the current sell position increased by one point to 82. Buyer traffic increased by 2 points to 61, and sales expectations for the next 6 months remained stable at 81.

Robert Dietz, chief economist at NAHB, said: “The single-family construction market has moved away from the continued warming dynamics of construction last fall and has reached an even warmer but more stable level of activity. , as evidenced by the HMI of September. “While challenges with building materials remain, the rate of cost escalation has slowed for some products, but the rate of job vacancies in construction continues to be high. ”

Affordability will be the biggest hurdle for builders over the next few months as they are forced to raise prices to keep up with the cost of construction. Buyers are always helped by falling mortgage rates, but if rates start to rise, the pressure on their portfolios will intensify.

Mortgage giant Fannie Mae lowered expectations for fourth-quarter new home sales to 789,000 units (annually) from 846,000 units, citing supply issues as well as higher house prices.

“Affordability remains a challenge even with mortgage rates close to historic lows; If the pace of income growth does not keep pace with inflation and interest rates rise more than expected, we expect real estate activity to exceed our current estimates. will slow down, ”said Doug Duncan, chief economist for Fannie Mae.

Regionally, builders sentiment in the Northeast fell 2 points to 72 at the three-month moving average. In the south it fell 2 points to 80 and the west 2 points to 83. Midwest was unchanged at 68.

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