Homebuilder confidence down on higher lumber prices

Homebuilder confidence fell in June behind spiking lumber prices because of an ongoing spat between the United States and Canada.

Builder sentiment in the market for new single-family homes fell 2 points, to 68, on the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index released on Monday. 

The decline was mostly due to elevated lumber prices, although overall sentiment remains on solid footing.

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“Builders are increasingly concerned that tariffs placed on Canadian lumber and other imported products are hurting housing affordability,” said NAHB Chairman Randy Noel, a custom-home builder from LaPlace, La.

“Record-high lumber prices have added nearly $9,000 to the price of a new single-family home since January 2017.”

The Trump administration slapped tariffs averaging 20.83 percent on Canadian lumber imports in November.

Last week, a bipartisan group of 171 congressional lawmakers sent a letter to Commerce Secretary Wilbur Ross and U.S. Trade Representative Robert Lighthizer arguing that the tariffs have significantly pushed up the prices on lumber used in the construction of U.S. residential building since the U.S. slapped tariffs on the wood announced in November. 

“With no agreement and tariffs averaging just over 20 percent in place, lumber prices have skyrocketed, hitting an all-time high this year,” the lawmakers wrote.

“We respectfully request that you return to the negotiating table with Canada and redouble your efforts to reach a new softwood lumber agreement,” they said.

About 30 percent of all lumber used in U.S. homebuilding comes from Canada, according to the NAHB.

“Improved economic growth, continued job creation and solid housing demand should spur additional single-family construction in the months ahead,” said NAHB chief economist Robert Dietz.

“However, builders do need access to lumber and other construction materials at reasonable costs in order to provide homes at competitive price points, particularly for the entry-level market where inventory is most needed,” Dietz said.

All three housing indexes fell a single point in June.

The index measuring current sales conditions fell to 75, the component gauging expectations in the next six months dropped to 76, and the metric charting buyer traffic edged down to 50.

Regionally, looking at three-month moving averages, the Northeast rose 2 points, to 57, while the West and Midwest remained unchanged at 76 and 65, respectively. The South fell 1 point, to 71.

The 2006 agreement between the U.S. and Canada on softwood lumber expired Oct. 12, 2015.

Homebuilders, who oppose the tariffs, argue that prices on lumber have risen sharply this year, pushing up housing prices in a market that is struggling to meet consumer demand.

“Our members all over the country are telling us that this is killing housing,” Jerry Howard, head of the NAHB, told The Hill.

The homebuilders have asked Ross to look into how the tariffs are affecting housing, which accounts for about 15 percent of the economy.

The U.S. Lumber Coalition, which supports the tariffs, calls the argument that the tariffs are pushing up prices “inaccurate.”

“The price of lumber, like all commodities, fluctuates due to market forces,” the group said in a statement.