Homebuilders Still Optimistic About Housing Despite Record High Lumber Prices

All indications so far are that this year is going to be very productive one for the homebuilding industry. In fact, the National Association of Home Builders believes that single-family housing construction will reach a 13-year high in 2021.

Therefore, it’s probably not a surprise that homebuilders are still feeling bullish about their prospects this year. A new report from the NAHB shows that builder confidence, a measure of how homebuilders feel about the market, is currently just below its recent record high.

According to the report, builder confidence rose slightly in February, although not quite to the all-time high hit in November.

The increase came in spite of the fact that lumber prices hit a record high this month, which could significantly impact a housing market that’s desperately in need of more homes to sell.

“Lumber prices have been steadily rising this year and hit a record high in mid-February, adding thousands of dollars to the cost of a new home and causing some builders to abruptly halt projects at a time when inventories are already at all-time lows,” NAHB Chairman Chuck Fowke said. “Builders remain very focused on regulatory and other policy issues that could price out households seeking new homes in a tight market this year.”

According to the NAHB report, builder confidence remained elevated due to “strong buyer demand,” a condition that stretches back many months.

But NAHB Chief Economist Robert Dietz noted that builders may not be able to meet that demand due to lumber costs and other factors.

“Demand conditions remain solid due to demographics, low mortgage rates and the suburban shift to lower cost markets, but we expect to see some cooling in growth rates for residential construction in 2021 due to cost factors, supply chain issues and regulatory risks,” Dietz said. “Some builders are at capacity and may not be able to expand production due to these headwinds.”