ConDig (18-Jun-18). Despite robust demand levels, US homebuilder confidence unexpectedly dropped in June in the wake of higher lumber costs following the roll out of tariffs on Canadian imports.
The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) fell two points to 68 in June from, its lowest level in two months, compared with expectations for the index to remain unchanged at 70.
“Builders are optimistic about housing market conditions as consumer demand continues to grow,” said NAHB chairman Randy Noel.
“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.”
Lumber prices have jumped more than 30% this year to reach their highest level on record in the wake of US duties on imports from Canada, which have squeezed supplies and boosted home-construction costs.
All three HMI indexes edged down a single point in June, with the index measuring current sales conditions falling to 75. The component gauging expectations in the next six months dropped to 76 and the metric charting buyer traffic edged down to 50.
The three-month moving averages for regional HMI scores saw the Northeast increase two points to 57, while the West and Midwest remained unchanged at 76 and 65, respectively. The South fell one point to 71.
“Improved economic growth, continued job creation and solid housing demand should spur additional single-family construction in the months ahead,” said NAHB chief economist Robert Dietz.
“However, builders do need access to lumber and other construction materials at reasonable costs in order to provide homes at competitive price points, particularly for the entry-level market where inventory is most needed.”
Demand for homes in the US continues to be underpinned by inventory shortages and a lack of skilled workers, while mortgage rates are still hovering around near historic lows despite recent moves higher.
But concerns continue to lingering over whether growth in the sector this year could be hampered by further rises in mortgage rates that could leave many price-sensitive first-time buyers on the sidelines of the market, while labor, land and material costs continue to be elevated.
The slight wobble in the US homebuilder market was underlined by recent US Department of Housing and Urban Development and US Census Bureau figures that showed sales of newly built, single-family homes edged down 1.5% in April to a seasonally adjusted annual rate of 662,000 units.