Homebuilder confidence sinks to 13-month low

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Homebuilder confidence fell to a 13-month low in August as higher material costs and home prices hurt sentiment. 

The National Association of Homebuilder’s/Wells Fargo Housing Market Index declined by 5 points in August to 75, the lowest reading since July 2020. Any reading above 80 signals strong demand. The index can range between 0 and 100 with any print over 50 indicating positive sentiment.

"While the demographics and interest for home buying remain solid, higher costs and material access issues have resulted in lower levels of home building and even put a hold on some new home sales," said Robert Dietz, chief economist at NAHB.

Builders have since the reopening of the economy grappled with supply-chain disruptions that have caused the cost of lumber and other materials to soar amid a period of strong demand for building projects. 

Two of the three major indexes within the report posted declines.

Current sales conditions dipped five points to 81 while the component measuring prospective-buyer traffic also fell five points to 60. Sales expectations for the next six months were unchanged at 81. 

The three-month moving average for builder sentiment fell across all regions. 

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The moving average declined one point to 74 in the Northeast, two points to 68 in the Midwest, three points to 82 in the South and two points to 85 in the West.

"While these supply-side limitations are holding back the market, our expectation is that production bottlenecks should ease over the coming months and the market should return to more normal conditions," Dietz said. 

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