Builder confidence fell by 5 points to 75 in August, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released on Tuesday.

That number is the lowest it’s been in 13 months, falling from 80 in July. While anything above 50 is considered to be a good market, the drop indicates that high material costs and labor shortages are tampering confidence even as demand for building is at an all-time high amid an inventory shortage. In April, near the beginning of the pandemic, builder confidence clocked in at 30.

Chuck Fowke | Photo credit: NAHB

“Buyer traffic has fallen to its lowest reading since July 2020 as some prospective buyers are experiencing sticker shock due to higher construction costs,” NAHB Chairman Chuck Fowke said in a statement. “Policymakers need to find long-term solutions to supply-chain issues.”

The index is based on a scale from zero to 100 and gauges builder perceptions of single-family homes sales and sale expectations for the next six months.

“While the demographics and interest for home buying remain solid, higher costs and material access issues have resulted in lower levels of home building and even put a hold on some new home sales,” NAHB Chief Economist Robert Dietz said in a statement. “While these supply-side limitations are holding back the market, our expectation is that production bottlenecks should ease over the coming months and the market should return to more normal conditions.”

Current sales conditions dropped 5 points to 81 while buyer traffic also dropped 5 points to 60. Sales expectations in the next six months remained the same at 81 points. All regions in the U.S. saw minor drops in builder confidence but the number are still quite high historically. At 85, builder confidence is highest in the Western region of U.S. and, at 68, lowest in the Midwest.

Email Veronika Bondarenko

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Limited time: Get 30 days of Inman Select for $5.SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription