Builder confidence declined by one point to 80 in July, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), released on Monday.

Labor shortages, regulatory costs and high costs of materials continued to dampen builder confidence, but strong buyer demand helped moderately temper those challenges in July.

The NAHB noted that the cost of oriented strand board (OSB) has been a particularly striking pain point for builders, with the price of OSB having surged more than 500 percent above its January 2020 cost as of the beginning of July.

“Such cost increases are putting upward pressure on home prices and sidelining many prospective homebuyers,” the NAHB’s report stated. “The situation has become so extreme that the White House recently heeded NAHB’s request to bring together stakeholders for a supply chain summit on July 16.”

The HMI is based on a scale of zero to 100 and measures builder perceptions of single-family home sales and sale expectations for the next six months. It’s a weighted average of three indices generated by the NAHB: present single-family sales, single-family sales for the next six months, and traffic of prospective buyers. A score above 50 means that more builders see conditions as good, rather than poor.

The HMI indices that measure current sales conditions and traffic of prospective buyers both fell in June, by one point to 86 and by six points to 65, respectively. Meanwhile, the index that gauges sales expectations over the next six months rose by two points to 81.

The three-month moving average for regional HMI scores was strongest in the West, although the region saw a three-point decline to an average of 87. The South’s three-month moving average remained steady at 85, while the Northeast fell four points to 75, and the Midwest fell one point to 71.

Email Lillian Dickerson

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