Homebuilder confidence is high, but rising costs of materials present major risks

Builder sentiment in the single-family housing market was unchanged at 83 in May.

Strong buyer demand is keeping homebuilders confident, but rising costs of construction materials are weighing on housing affordability.

Builder sentiment in the single-family housing market was unchanged at 83 in May, according to the NAHB/Wells Fargo Housing Market Index. Anything above 50 is considered positive sentiment.

The index had plummeted to 37 last May, as the pandemic lockdown hit and the housing market shut down. It then rebounded dramatically in June and July, as consumers rushed out to buy suburban homes, seeking more space for working and schooling from home.

Builders now say they continue to see a steady stream of buyers, due in large part to the extreme shortage of existing homes for sale. Continued low mortgage rates are helping some with affordability, but with prices rising fast, purchasing power is weakening.