Building Material Costs are Top Concern Despite Builder Confidence

While low existing home inventory, mortgage rates, and a growing number of prospective buyers keep builder confidence up, building material costs threaten affordability and availability. According to the National Association of Home Builders, rising home prices resulting from increased land, labor, and material costs put first-time and first-generation homebuyers at risk for losing a purchase. NAHB calls on policymakers to recognize the threat and to ramp up production of domestic construction materials such as lumber and steel, in addition to pausing tariffs on imported materials. NAHB says home prices will continue to rise through 2021.

In recent months, aggregate residential construction material costs were up 12 percent year-over-year, and our surveys suggest those costs are rising further. 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.

With labor and lot availability a challenge in many markets, new home prices will rise through 2021.

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.”