Builders’ sentiment has dropped to its lowest stage in over a yr as consumers expertise sticker shock

The price of wood has fallen sharply in recent months, but that was apparently not enough to relieve the builders.

Sentiment among single-family home builders fell by 5 points to 75 points in the National Association of Home Builders (NAHB) / Wells Fargo Housing Market Index (HMI) in August.

Anything over 50 is considered positive, but that’s the lowest since July 2020. The index stood at 78 last August.

Of the three components of the index, the current sales conditions fell by 5 points to 81 and the traffic from prospective buyers also fell by 5 points to 60. The sales expectations for the next six months remained unchanged at 81.

Builders struggle with rising costs for materials and skilled workers. This is driving the price of new buildings higher and higher and has a significant impact on demand.

More than 56% of new and existing homes sold between early April and late June were affordable for families with a median income of $ 79,900. This is a significant decrease from the 63.1% of apartments sold in the first quarter of 2021 and the lowest affordability level since the NAHB’s revised series began in the first quarter of 2012.

“Some potential buyers are experiencing sticker shock because of the higher construction costs,” said NAHB chairman Chuck Fowke, a home builder based in Tampa, Florida. “Policy makers need to find long-term solutions to supply chain problems.”

The price of wood has fallen dramatically since its peak at the beginning of the year. Wood fell 4.91% on Monday to $ 470.90, its lowest since July 6, 2020. Wood is down 72.48% from its intraday high of $ 1,711.20 on May 10.

“While wood prices are improving, the price and availability of other building materials remain a challenge. These materials include flooring, drywall, appliances and windows,” said NAHB chief economist Robert Dietz.

According to a NAHB analysis of producer price index data, aggregate prices for housing materials increased by 13% in the first six months of 2021.

“While demographics and interest in home buying remain solid, higher costs and material access issues have resulted in lower construction volumes and even slowed some new home sales,” added Dietz, saying that his expectation was production bottlenecks in the coming months subsides and the market should return to more normal conditions.

Based on the three-month moving averages for regional HMI values, the mood in the northeast fell by 1 point to 74 and in the Midwest by 2 points to 68. In the south, the mood of the building owners fell by 3 points to 82 and in the west by 2 points to 85.