According to the National Association of Homebuilder's (NAHB)/Wells Fargo housing market index, the reading for homebuilder confidence for newly built single-family homes for the month of May was 83, holding steady month-over-month. The housing market index can range between 0 and 100, and anything over 50 is considered positive sentiment.
However, the NAHB notes that aggregate residential construction material costs are up 12% year-over-year and are expected to move even higher.
NAHB CEO Jerry Howard told FOX Business' Stuart Varney in an interview on Monday that the cost of lumber, for example, has reached $1,400 per thousand board feet, up from $400 per thousand board feet two years ago. As a result, Howard explained that the cost of a house has increased by $35,000.
In addition, Howard stressed that the construction industry continues to have trouble hiring due to the impacts of COVID-19, increasing the time it takes to build a house.
"We rely on immigrant labor to some point, legal immigrant labor, but we also have to show the American workers, those that were put out of jobs during the COVID recession, if you were working in the construction industry, you never would’ve been laid off," Howard said. "We are an essential industry, there are good careers there, we just have to get a lot of Americans looking at these jobs as the future of their careers."
While low interest rates are helping with housing affordability, purchase power is weakening. Howard warns that the combination of higher supply costs and the homebuilding delays due to the ongoing labor shortage will push first-time and first generation homebuyers out of the market.
NAHB estimates that consumers can expect rising prices for homes through at least the end of 2021.
As for the other components of the index, the reading for current sales conditions held steady at 88, and the gauge charting sales expectations in the next six months rose one point to 81. Meanwhile, the component measuring traffic of prospective buyers fell one point to 73.
On a the three-month moving average, builder sentiment in the South increased by 1 point to 84 and remained unchanged in the West at 90. In the Northeast, sentiment fell 4 points to 82 and in the Midwest it dropped 3 points to 75.