Key Points
- Homebuilder confidence fell sharply in April, according to a monthly index from the National Association of Home Builders.
- The war with Iran has driven up mortgage rates and has been accompanied by sharp increases in materials and transportation costs due to soaring oil prices.
- A large number of building suppliers reported price increases in April on everything from foam insulation and roofing to windows and doors.
A version of this article first appeared in the CNBC Property Play newsletter with Diana Olick. Property Play covers new and evolving opportunities for the real estate investor, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. Sign up to receive future editions, straight to your inbox. U.S. homebuilders were hoping for a robust spring market this year, after winter brought lower mortgage rates and higher demand from homebuyers. The war with Iran has undermined that optimism, pushing interest rates higher and adding to sharp increases in materials and transportation costs due to soaring oil prices. Homebuilder confidence in April, the heart of the spring housing market, fell sharply, according to a monthly index from the National Association of Home Builders. “With oil prices rising in the United States, 62 percent of builders said their suppliers have increased their costs for building materials due to rising fuel prices, including gasoline and diesel,” Robert Dietz, NAHB chief economist, said in a statement. “Energy costs represent approximately 4% of the costs of building materials and residential services. With near-term economic risks high, 70% of builders reported difficulty pricing homes due to uncertainty over material costs. A large number of building suppliers reported price increases in April on everything from foam insulation and roofing to windows and doors. The cost of manufacturing these products and transporting them has rapidly increased. “We’re starting to hear more about price increases from contractors and suppliers as well as transportation and fuel surcharges,” said Rick Palacios, research director at John Burns Research and Consulting. The JBRC surveyed homebuilders on this topic in early April and found that 38% of builders nationwide reported delivery delays or price increases due to rising fuel costs. Regionally, some increases have been higher. In Florida and Texas, for example, builders reported price increases of 47% and 45%, respectively. And almost all products are affected. Mohawk Industries, the world’s largest flooring manufacturer, announced that it will implement an 8% price increase on primary residential and commercial soft surfaces (carpet, carpet tiles and carpet pads) and certain hard surface products effective April 27. Cornerstone Building Brands is raising prices on windows and doors, from vinyl to aluminum products. This will come into effect on June 1. In a letter to suppliers on March 30, Cornerstone wrote: “Over the past several months, our industry has experienced increased volatility due to ongoing economic and political developments. These factors have led to sustained increases in the cost of raw materials, transportation and labor. » Paint giant Sherwin-Williams increased prices on paint by 9% and bulk solvents, thinners and reducers by 18%. This led to an analyst rating downgrade by Wells Fargo earlier this month. “The war in Iran has led to widespread inflation across most commodity chains, spilling over into coatings raw materials,” Wells Fargo analyst Michael Sison said in a note to clients. “We believe margins will be pressured by rising raw material costs as the conflict in the Middle East persists.” Even sprayed polyurethane takes a hit. In a post on its website, Performance Pro Supply, an insulation products company, wrote: “We don’t raise our prices or blame others. We show you the amount of the increases as we receive them from manufacturers. » He then listed several manufacturers showing price increases ranging from 6% to 15%. “Ultimately, not only has the housing industry brought buyer traffic under control, but builders now face a whole new set of raw material and supply challenges,” Peter Boockvar, an economist and market strategist, wrote in a research note.