Builder sentiment hit its lowest level this month amid supply chain shortages and increasing material prices, according to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
 
What This Means
 
"Higher costs and declining availability for softwood lumber and other building materials pushed down builder sentiment in June," said 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. Policymakers need to focus on supply-chain issues in order to allow the economic recovery to continue."

"While builders have adopted a variety of business strategies—including price escalation clauses to deal with scarce building materials, labor and lots—unavoidable increases for new-home prices are pushing some buyers to the sidelines," said NAHB Chief Economist Robert Dietz. "Moreover, these supply-constraints are resulting in insufficient appraisals and making it more difficult for builders to access construction loans."
 
Who's Feeling the Strain?

The Northeast is being hit hard—dropping five points in builder sentiment to 78. The Midwest is not far behind, however, with a three-point drop to 72. The South rose one point to 85, while the West fell one point to 89.

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