Jun 16, 2021 - Economy & Business

Key homebuilder sentiment index hits 10-month low

Data: National Association of Home Builders; Chart: Axios Visuals

New details on the epic disruption facing homebuilders emerged Tuesday, as a key sentiment index reached a 10-month low.

Why it matters: Homebuilders are passing along their higher materials costs to customers, increasingly pushing home prices out of reach for some aspiring buyers.

What's new: The National Association of Homebuilders/Wells Fargo Housing Market Index, which tracks builders' sentiment, dropped 2 points to 81 versus consensus for a reading of 83.

  • "Higher costs and declining availability for softwood lumber and other building materials pushed down builder sentiment in June," says NAHB chairman Chuck Fowke.
  • "These higher costs have moved some new homes beyond the budget of prospective buyers, which has slowed the strong pace of home building."

Go deeper: The impact of the supply problems is spreading to home finance.

  • Appraisals aren't keeping up with homes' rising market prices, which leads to trouble getting mortgages and construction loans, says NAHB chief economist Robert Dietz.

Fowke called on Washington to lend a hand. "Policymakers need to focus on supply-chain issues in order to allow the economic recovery to continue,” he wrote in his statement.

Context: The latest NAHB index reading is still high by historical standards — anything above 50 is considered positive — but it's a notable shift from a record peak of 90 in November.

  • Lumber prices have pulled back from their high last month, but are still much more expensive than usual.

What to watch: Housing starts data for May is due out later today, and new home sales data for the month will be released June 23.

Go deeper