National Association of Home Builders CEO Jerry Howard explained on Tuesday why he believes homebuilder confidence fell to a 13-month low in August and warned that supply chain issues must be resolved "quickly."
Howard noted on FOX Business' "Varney & Co." on Tuesday that higher material costs and the fact that "nothing has been done to correct" supply chain issues have hurt sentiment.
Since the reopening of the economy, following COVID-19 lockdowns, builders have grappled with supply-chain disruptions that have caused the cost of lumber and other materials to soar amid a period of strong demand for building projects.
The National Association of Homebuilder’s/Wells Fargo Housing Market Index declined by 5 points in August to 75, the lowest reading since July 2020. Any reading above 80 signals strong demand. The index can range between 0 and 100 with any print over 50 indicating positive sentiment.
The index results were released as home prices have been hitting record highs.
The median price for an existing home in the U.S. hit a new record high at $363,300 in June, up 23.4% from a year ago and breaking the previous record set the month prior, according to data from the National Association of Realtors released late last month.
The association noted that existing home sales also rose in June, rebounding after four consecutive months of declines as more inventory hit the market for hungry buyers.
Lawrence Yun, NAR's chief economist, noted that supply had "modestly improved in recent months" in part because of more housing starts, however, Howard warned on "Varney & Co." on Tuesday that supply chain issues continue to weigh on the housing market.
NAHB chief economist, Robert Dietz, echoed that sentiment saying on Tuesday that "while the demographics and interest for home buying remain solid, higher costs and material access issues have resulted in lower levels of home building and even put a hold on some new home sales."
"Prices are getting incredibly higher every month," Howard told host Stuart Varney. "Builders are now starting to say, ‘We can’t build the house we promised you.’"
Howard said builders have been giving back earnest money to potential customers and have been canceling contracts.
Earnest money is a deposit of good faith that one puts down with an offer on a home and is typically applied to a down payment and closing costs at settlement, according to Credible, which is majority-owned by FOX Business parent company Fox Corporation.
Two of the three major indexes within the NAHB report posted declines.
Current sales conditions dipped five points to 81 while the component measuring prospective-buyer traffic also fell five points to 60. Sales expectations for the next six months were unchanged at 81.
The three-month moving average for builder sentiment fell across all regions.
The moving average declined one point to 74 in the Northeast, two points to 68 in the Midwest, three points to 82 in the South and two points to 85 in the West.
This is the third month in a row that our index has gone down," Howard noted.
He then had this message for policymakers: "If you want us to continue to be a positive impact on the economy, whether it’s the builders themselves, Home Depot or Lowe's, or anyone else, you need to do something to fix the supply chain and do it quickly."
|HD||THE HOME DEPOT INC.||287.54||+2.90||+1.02%|
|LOW||LOWE'S COS. INC.||187.94||+4.03||+2.19%|
Dow member Home Depot Inc. beat on both the top and bottom lines in the second quarter, but same-store sales grew by the smallest amount in two years as the do-it-yourself trend diminished amid the reopening of the economy, according to the company’s earnings report released on Tuesday.
Lowe's is expected to release its second quarter earnings report on Wednesday morning.
FOX Business’ Breck Dumas and Jonathan Garber contributed to this report.