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NAHB: Supply Problems Continue to Worry Builders

Buyer demand remains strong, but builders can’t deliver homes until supply-side challenges subside, pushing NAHB’s builder attitude index one point lower this month.

WASHINGTON – Strong buyer demand helped offset supply-side challenges in the new-home industry this month, pushing the monthly index – the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) – one point lower in July to 80.

“Builders continue to grapple with elevated building material prices and supply shortages, particularly the price of oriented strand board, which has skyrocketed more than 500% above its January 2020 level,” says NAHB Chairman Chuck Fowke, a custom home builder from Tampa. “We are grateful that the White House heeded our urgent plea to hold a building materials meeting with interested stakeholders on July 16 to seek solutions to end production bottlenecks that have harmed housing affordability.”

“Builders are contending with shortages of building materials, buildable lots and skilled labor as well as a challenging regulatory environment,” adds NAHB Chief Economist Robert Dietz. “This is putting upward pressure on home prices and sidelining many prospective homebuyers even as demand remains strong in a low-inventory environment.”

The three major HMI indices were mixed in June. The HMI index gauging current sales conditions fell one point to 86, the component measuring traffic of prospective buyers dropped six points to 65, and the gauge charting sales expectations in the next six months posted a two-point gain to 81.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell four points to 75, the Midwest moved one-point lower to 71 and the West posted a two-point decline to 87. The South held steady at 85.

Derived from a monthly survey that NAHB has been conducting for 35 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

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