2021.03.1615:24:00UTC+00U.S. Homebuilder Confidence Drops Due To Concerns About Higher Material Costs

The National Association of Home Builders released a report on Tuesday showing a slightly bigger than expected decrease in U.S. homebuilder confidence in the month of March.

The report said the NAHB/Wells Fargo Housing Market Index fell to 82 in March after inching up to 84 in February. Economists had expected the index to edge down to 83.

"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," said NAHB Chairman Chuck Fowke.

"Supply shortages and high demand have caused lumber prices to jump about 200 percent since last April," he added. "Policymakers must address building material supply chain issues to help the economy sustain solid growth in 2021."

The pullback by the headline index came as the index gauging current sales conditions fell to 87 in March from 90 in February.

The gauge charting traffic of prospective buyers was unchanged at 72, while the component measuring sales expectations in the next six months rose to 83 in March from 80 in February.

"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," NAHB Chief Economist Robert Dietz. "And mortgage interest rates, while historically low, have increased about 30 basis points over the last month."

He added, "Nonetheless, the lack of resale inventory means new construction is the only option for some prospective home buyers."

On Wednesday, the Commerce Department is scheduled to release a separate report on new residential construction in the month of February.

Housing starts expected to decrease by 0.9 percent to an annual rate of 1.565 million, while building permits are expected to plunge by 7.2 percent to a rate of 1.750 million.