The National Association of Home Builders (NAHB) just released its latest Producer Price Index for June 2018. This Index report indicates that softwood lumber increased +6.4% in one month! Strand board increased +4.1% as well.

These product prices for lumber are on top of +5.8% increases already posted in 2018, a level +8.3% higher than last year at this time.

Adding tariffs onto the increased price of lumber, you now have the highest prices for lumber on record. These record prices for lumber have increased the cost of a new single-family home by $9,000 in just one year.

According to the NAHB, “tariffs on lumber and other imported materials make construction more expensive and, in turn, limit affordability for prospective buyers.”

These elevated lumber and building materials (steel, concrete, glass, etc.) product and tariff costs clearly impact the home builders’ confidence levels regarding new home sales.   That confidence level fell in May to its lowest point this year, according to the NAHB/Wells Fargo.

Check out these national Index indicators:

  • Housing Market Index fell to 68 from 70 in May.
  • Gauge of 6-month sales outlook fell to 76, the lowest since November 2017.
  • Current sales measure for single-family homes fell to 75 from 76.
  • Gauge of prospective buyer traffic declined to a 7-month low at 50.

Always remember, however, that national housing market statistics do not reflect local markets. In the Midwest, the Index fell to 64 from 67 and it dropped to 69 from 71 in the South. In the Northeast, developer/builder confidence rose to 61 from 56. Developer/builder confidence rose to 61 from 56 in the Northeast and fell from 76 to 75 in the West.

Considering the above indicators, the pros include a continued strong job market, larger after-tax paychecks and still strong developer confidence. On the other hand, the cons include higher mortgage rates, historical shortages of affordably priced single-family homes and soaring home price values make buying a home challenging, particularly for first-time buyers.

Randy Hood, chairman of NAHB and custom builder in Louisiana, “builders are increasingly concerned that tariffs placed on Louisiana lumber and other imported products are hurting housing affordability…(simultaneously,) builders are optimistic about housing market conditions as consumer demand continues to grow.”