Home builders

High lumber prices and other hurdles stifle the confidence of builders and home buyers

Home builders are stunned by the growing demand for new homes, but they are not too happy with high lumber prices, labor shortages, and other obstacles in their path.

A survey of manufacturers shows they are still very confident their business will improve, but they are not as optimistic as they were at the end of last year.

The National Association of Home Builders monthly confidence index slipped to 81 in June from 83 in May. This is the lowest level in nine months.

Confidence took a hard hit during the early stages of the pandemic as sales briefly plunged. Yet record mortgage rates and the end of the nationwide foreclosure have led to an explosion in demand among homebuyers. The index peaked at a record 90 in November, well above the pandemic low of 37.

Index readings above 50 are a sign of improved confidence.

Home builders, however, face many obstacles. High lumber prices drastically increased the cost of construction on the one hand, and a shortage of skilled labor weighed on builders for years.

These problems will not go away overnight. Lumber prices have fallen 42% from their peak in early May, for example, but are still much higher than a year ago.

Read: Consumer prices in the United States are rising again and pushing the CPI inflation rate to its highest level in 13 years

Also: Inflation is skyrocketing. How high will it go? Discover the new MarketWatch tracker.

As a result, home buyers face higher prices and limited selection, especially given a similar shortage of existing homes for sale.

“These higher costs have moved some new homes beyond the budget of potential buyers, which has slowed the sustained pace of home construction,” said NAHB President Chuck Fowke.

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