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Builder Confidence Takes a Hit Amid Rising Mortgage Rates, Lumber Prices

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Builder Confidence Takes a Hit Amid Rising Mortgage Rates, Lumber Prices


March 17, 2021
Builders talking
Photo: makibestphoto

Builder confidence dipped 2 points this month as pressing issues, such as rising building material prices, delivery times, and mortgage rates, continue. The National Association of Home Builders/Wells Fargo Housing Market Index reported an 82 builder confidence rating for March, down from 84 in February. For comparison, builder sentiment fell to 72 in March 2020 but reached 90 in November. Anything over 50 is considered positive. More specifically, builder sentiment for current sales conditions also fell slightly to 87, but sales expectations for the next six months increased to 83. Views toward buyer traffic remained unchanged at 72.

A record low supply of homes for sale has caused prices for existing and newly built homes to rise quickly. Higher costs for builders are only exacerbating the situation, as these costs are being passed on to buyers. The median price of a newly built home was up more than 5% year over year in January.

“While single-family homebuilding should grow this year, the elevated price of lumber is adding approximately $24,000 to the price of a new home,” said Robert Dietz, chief economist for the NAHB. “And mortgage interest rates, while historically low, have increased about 30 basis points over the last month.”

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