In the Face of Record-High Lumber Prices, Builders Remain Confident

Despite lumber prices shooting up after a bout of price drops, home builder confidence inched up this month. According to the National Association of Home Builders and Wells Fargo Housing Market Index, builder sentiment increased by 1 point to 84 this month. To put it in perspective, any number above 50 can be considered positive and last February, confidence reached 74. But record-high lumber prices continue to affect housing affordability and residential construction, with some builders even having to pause on projects during a time with record low inventory, NAHB Chairman Chuck Fowke told CNBC. 

While prices are a concern in both the new and existing home markets, there appears to be very little pullback in buyer demand. Of the index’s three components, current sales conditions held steady at 90, and traffic of prospective buyers rose 4 points to 72. Sales expectations in the next six months, however, fell 3 points to 80.

“Demand conditions remain solid due to demographics, low mortgage rates and the suburban shift to lower-cost markets, but we expect to see some cooling in growth rates for residential construction in 2021 due to cost factors, supply chain issues and regulatory risks,” said the NAHB’s chief economist, Robert Dietz. “Some builders are at capacity and may not be able to expand production due to these headwinds.”

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