Construction materials costs increases 19%, leading to dip in buyer confidence

Market Trend

Construction materials costs increases 19%, leading to dip in buyer confidence

Builder confidence kicked off 2022 with the first decline in four months as rising inflation and supply chain disruptions continue to complicate homebuilders’ jobs, according to the National Association of Homebuilders (NAHB) and the Wells Fargo Housing Market Index (HMI).

The index decreased by one point to 83 in January after hovering around 83 and 84 for the past three months despite demand for homes remaining as high as ever, the latest NAHB report released on Tuesday shows.

“Higher material costs and lack of availability are adding weeks to typical single-family construction times,” said NAHB Chairman Chuck Fowke, a Tampa, Florida-based custom home builder.

The combined impact of wildfires in the west and the Biden administration doubling tariffs on Canadian softwood lumber have caused the price of lumber to jump roughly 85 percent in the past three months, according to the Lumber industry trade journal Random Lengths. As inflation rates rise, the cost of construction materials in general has shot up 19 percent since Dec. 2021, according to the NAHB.

“Policymakers need to take action to fix supply chains,” Fowke said. “Obtaining a new softwood lumber agreement with Canada and reducing tariffs is an excellent place to start.”

The index, conducted by the NAHB via a survey of builders gauging their interpretations of current single-family home sales, home sales for the next six months, and traffic of prospective buyers found that sentiment for current sales remained high at 90, while sales expectations for the next six months fell two points to 83. The measure of perspective buyers also fell two points to 69.

The data was collected during the first two weeks and does not account for the most recent jump in mortgage rates, according to the NAHB.

The association predicted the ongoing supply chain issues would have a lasting impact on affordability throughout 2022.

“While lean existing home inventory and solid buyer demand are supporting the need for new construction, the combination of ongoing increases for building materials, worsening skilled labor shortages and higher mortgage rates point to declines for housing affordability in 2022,” said NAHB Chief Economist Robert Dietz.

Regionally, the Northeast saw the only measurable decline, with sentiment falling one point to 73. Meanwhile, the Midwest increased one point to 75, while the South and West both saw a one point rise to 88.

Dec 17, 2020 Real Estate