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Home Builder Sentiment Drops to Lowest Level Since 2020

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Market Data + Trends

Home Builder Sentiment Drops to Lowest Level Since 2020


August 18, 2021
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Photo: Pichsakul | stock.adobe.com

Home builder sentiment dropped to its lowest level since July 2020 amid continued labor and building material challenges. The National Association of Home Builders/Wells Fargo Housing Market Index reported builder sentiment at 75 in August, down 5 points from last month's index. Anything over 50 is considered positive. The index reports on three components: current sales conditions, traffic of prospective buyers, and sales expectations in the next six months. Future sales expectations remained at 81 while the other two components fell 5 points to 81 for current sales conditions and 60 for traffic of prospective buyers.

Builders are contending with continued rising costs for materials as well as for skilled labor. That is pushing the price of newly built homes ever higher and clearly affecting demand.

More than 56% of new and existing homes sold between the beginning of April and end of June were affordable to families earning the U.S. median income of $79,900. This is down sharply from the 63.1% of homes sold in the first quarter of 2021 and the lowest affordability level since the beginning of the NAHB’s revised series in the first quarter of 2012. 

“Some prospective buyers are experiencing sticker shock due to higher construction costs,” said NAHB Chairman Chuck Fowke, a homebuilder from Tampa, Florida. “Policymakers need to find long-term solutions to supply-chain issues.” 

The price of lumber has come down dramatically since its peak earlier this year. Lumber fell 4.91% on Monday to settle at $470.90, its lowest since July 6, 2020. Lumber is down 72.48% from its intraday peak of $1,711.20 on May 10.

“While lumber prices are showing improvement, the price and availability of other building materials remain a challenge. These materials include flooring, drywall, appliances and windows, said the NAHB’s chief economist, Robert Dietz.

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