Home Builder Confidence Hits All-Time High Despite Lumber Price Concerns
Home builders across the United States are feeling good about the current state of the housing market. But could lumber prices sink the ship?
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When the coronavirus pandemic reached the U.S. in early 2020, it created an immediate air of uncertainty about how the rest of the year would play out. As government shutdowns and social distancing slowed business in the construction industry to a crawl this spring, a doom-and-gloom outlook for the summer ahead seemed reasonable.
Instead, this summer was an incredibly busy one for contractors and home builders across the country. Housing starts and permit applications reached the highest recorded figures in years, and new homes were being sold at historic rates.
Coming off this surprisingly busy summer, builders are now looking at the end of the year with much more optimism than they might have a few months ago. The latest Housing Market Index from the National Association of Home Builders reflects that optimism, hitting a record high for the second consecutive month. September’s score of 83 handily surpassed the 78 from August. (Scores can range from zero to 100.)
The HMI is a weighted score based on survey results from NAHB members; it’s been around for 30 years. The latest marks represent an extraordinary resurgence from earlier in the year, when the HMI plummeted to 30 in April.
Unfortunately, news in the construction industry is not all good. Though the market seems perfectly positioned to provide plenty of quality work to home builders, there are still a few significant factors holding the industry back.
“Historic traffic numbers have builders seeing positive market conditions, but many in the industry are worried about rising costs and delays for building materials, especially lumber,” said Chuck Fowke, the NAHB chairman. “More domestic lumber production or tariff relief is needed to avoid a slowdown in the market in the coming months.”
Lumber prices are certainly an ever-growing problem, climbing 14.9 percent in August and almost 50 percent since April. The NAHB’s chief economist, Robert Dietz, estimates the increase in lumber prices has added more than $16,000 to the price of a typical single-family home.
“That said, the suburban shift for home building is keeping builders busy, supported on the demand side by low interest rates,” adds Dietz. “In another sign of this growing trend, builders in other parts of the country have reported receiving calls from customers in high-density markets asking about relocating.”