Chart: Builder Confidence Soars, but Lumber Could Dampen Mood
Originally published by: NAHB — August 17, 2020
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Editor’s Note: As the chart below shows, the housing market has experiences a significant V-shaped recovery. This rapid surge in new-construction demand has created a lumber shortage that is creating financial distress throughout the supply chain. To hear more about the lumber, market, listen to the latest SBCA Lumber Connection podcast and check out the results from the more recent survey of CMs regarding the lumber market.
In a sign that housing continues to lead the economy forward, builder confidence in the market for newly-built single-family homes increased six points to 78 in August, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The HMI now stands at its highest reading in the 35-year history of the series, matching the record that was set in December 1988.
The demand for new single-family homes continues to be strong, as low interest rates and a focus on the importance of housing has stoked buyer traffic to all-time highs as measured on the HMI. Single-family construction is benefiting from low interest rates and a noticeable suburban shift in housing demand to suburbs, exurbs and rural markets as renters and buyers seek out more affordable, lower density markets, as seen in the separate NAHB HBGI.
However, the V-shaped recovery for housing has produced a staggering increase for lumber prices, which have more than doubled since mid-April. Such cost increases could dampen momentum in the housing market this fall, despite historically low interest rates.