Homebuilder Confidence Slips as Lumber Prices Spike
By Maggie Wilson @ Real Estate Daily
June 19, 2018

Homebuilders are eager to meet the rising demand for housing, but they are running into one roadblock after another. This time, it was rising lumber prices that took a chunk out of homebuilder sentiment.

Lumber prices have been on the rise since the U.S. put new tariffs on imports of Canadian softwood lumber late last year. Now, prices for softwood lumber–a primary component in homebuilding–are at record highs.

Key Takeaways

  • Homebuilder sentiment decreased 2 points to 68 in June
  • Rising lumber prices are the biggest concern for homebuilders today
  • The average cost of a new single-family home is up almost $10,000 since January 2017
Source: CNBC

Excerpt

Builder sentiment fell 2 points to 68 in June, according to the National Association of Home Builders/Wells Fargo Housing Market Index. The index stood at 66 last June. A reading above 50 is considered positive sentiment.

Builder sentiment has been mostly in the 70s since December, except for one dip in April, when mortgage rates took a sizable jump. This time, the weakness is all about the spike in material prices.

“Builders are optimistic about housing market conditions as consumer demand continues to grow,” said NAHB Chairman Randy Noel, a custom homebuilder from LaPlace, Louisiana. “However, builders are increasingly concerned that tariffs placed on Canadian lumber and other imported products are hurting housing affordability. Record-high lumber prices have added nearly $9,000 to the price of a new single-family home since January 2017.”

Canadian lumber tariffs went into effect last year, but lumber prices continued to soar amid high demand from homebuilders as well as wildfires and a shortage of rail transportation. Prices are up over 67 percent from a year earlier and hit a record high in May, but fell back slightly in June as demand fell off.

Of the index’s three components, each lost 1 point. Current sales conditions fell to 75, the component gauging sales expectations in the next six months dropped to 76 and buyer traffic fell to 50.

View the original article at CNBC