The home building industry’s confidence was shaken by high-priced materials and rising interest rates in March, according to research from a trade group released Tuesday.
The National Association of Home Builders’ monthly confidence index dropped two points to a reading of 82 in March, the trade group said. Economists had expected a reading of 83 after February’s 84.
Despite the decline, home builder confidence remains very high. Index readings over 50 are a sign of improving confidence and growth for the industry. In November, the index hit its all time high of 90.
“Builder confidence peaked at a level of 90 last November and has trended lower as supply-side and demand-side factors have trimmed housing affordability,” said Robert Dietz, chief economist at the National Association of Home Builders.
The measure of current single-family home sales slipped three points to 87. The gauge of expectations for future sales over the next six months rose to 83 from 80. The index that measures prospective buyer traffic held steady at 72.
A big concern for home builders is rapidly rising lumber prices. Framing lumber prices have skyrocketed more than 180 percent since last spring.
“While single-family home building should grow this year, the elevated price of lumber is adding approximately $24,000 to the price of a new home,” Dietz said
“Though builders continue to see strong buyer traffic, recent increases for material costs and delivery times, particularly for softwood lumber, have depressed builder sentiment this month,” NAHB Chairman Chuck Fowke said.
Interest rates have moved up in recent weeks, making buying homes more expensive. That also is likely weighing on homebuilder confidence.