The month of May sees a steady confidence among U.S. single-family home-builders despite worries over shortages of building materials, which are boosting prices and threatening to sideline first-time home-buyers from the market, as a survey shows.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index was unchanged at 83 in May. Any reading above 50 indicates that more builders view conditions as good than poor.
“Builder confidence in the market remains strong due to a lack of resale inventory, low mortgage interest rates, and a growing demographic of prospective home buyers,” NAHB Chairman Chuck Fowke said in a statement.
“However, first-time and first-generation home buyers are particularly at risk for losing a purchase due to cost hikes associated with increasingly scarce material availability.”
The demand for bigger and more expensive accommodations amid the COVID-19 pandemic, which has forced millions of Americans to work from home and take classes remotely, has fueled a housing market boom.
As the virus has disrupted labor supply at saw mills and ports, it has led to shortages of lumber and other raw materials. Tariffs on steel imports are also adding to building costs. Lumber prices surged 89.7% on a year-on-year basis in April, according to the latest producer price data.
“Policymakers must take note and find ways to increase production of domestic building materials, including lumber and steel, and suspend tariffs on imports of construction materials,” Fowke said.
According to the NAHB, aggregate residential construction material costs increased 12% on an annual basis in recent months, and appeared to have risen further.
Builders in many markets were also facing worker and land shortages, which could keep home prices elevated through this year. The survey’s measure of current sales conditions was unchanged at 88, but its gauge of sales expectations over the next six months rose one point to 81. The component measuring traffic of prospective buyers fell one point to 73.