Builder sentiment remained at 83 in May as rising materials prices affect housing affordability, according to cnbc.com. It reached a record high of 90 in November 2020.
Any reading above 50 indicates a positive market; the National Association of Home Builders/Wells Fargo Housing Market Index had fallen to 30 in April 2020.
Of the homebuilder index’s three components, current sales conditions were unchanged at 88; sales expectations in the next six months increased one point to 81; and buyer traffic fell one point to 73.
Builders continue to see steady demand from buyers, largely because of an extreme shortage of existing homes for sale. Low mortgage rates are continuing and helping with affordability, but purchasing power is threatened as prices rise fast.
“First-time and first-generation homebuyers are particularly at risk for losing a purchase due to cost hikes associated with increasingly scarce material availability,” said NAHB Chairman Chuck Fowke, a builder from Tampa, Fla.
Residential material costs have increased 12% year over year and continue to rise, causing problems for builders and the market.
“Some builders are slowing sales to manage their own supply chains, which means growing affordability challenges for a market in critical need of more inventory,” said Robert Dietz, NAHB’s chief economist. “Homebuyers should expect rising prices throughout 2021 as the cost of materials, land and labor continue to rise.”
