Single-family homebuilder sentiment dropped -5 points in August. High prices of newly build homes is affecting demand.
Homebuilder Sentiment Drops 5 Points in August to 75
According to the National Association of Home Builders/Wells Fargo Housing Market Index, the sentiment of single-family homebuilders dropped 5 points to 75 in August. This is the lowest score on this homebuilder sentiment index since July 2020.
Take a look at the specifics of the index’s three components:
- Current sales conditions dropped -5 points to 81
- Traffic of prospective buyers dropped -5 points to 60
- Sales expectations in next 6 months remained unchanged at 81
Know that any index score over 50 is considered positive.
Affordability Big Concern for Potential Buyers
Homebuilders (and potential buyers) have had to contend with rising costs of materials and labor in their pricing. (Lumber, once through the roof, is now down -72.48% from its peak of $1,711.20 on May 10 to $470.90, its lowest price since July 6, 2020.)
Robert Dietz, chief economist with the NAHB, said, “While lumber prices are showing improvement, the price and availability of other building materials remain a challenge.” An analysis by NAHB indicated that aggregate residential construction material pricing increased +13% in the first six months of 2021.
Down from 63.1% of homes sold in Q1 2021, some 56% of new and existing homes sold in Q2 2021 were affordable to families earning the US median income of $79,900. This is the lowest affordability level since the NAHB began reporting this data in Q1 2012.
Regional Averages for the Homebuilding Market Index (HMI)
Homebuilder sentiment index scores reflected regional differences:
- Northeast – down 1 point to 74
- Midwest – down 2 points to 68
- South – down 3 points to 82
- West – down 2 points to 85
(Keep in mind any score over 50 is considered positive.)
Thanks to NAHB/Wells Fargo Housing Market Index and CNBC.