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Rising material costs may have put a damper on US homebuilders’ already sinking confidence in July, but sorely needed single-family housing starts rallied in June, according to separate reports released this week.

American homebuilder confidence in the market for single-family homes fell two points to a reading of 64 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) this month. This was the lowest HMI reading in over six months.

The HMI is the result of a monthly survey conducted by NAHB of its members concerning current and future single-family home sales, as well as potential homebuyer traffic.

NAHB says builders’ waning confidence is a result of rising material costs and both the cost and availability of labor. Lumber, in particular, has been a growing concern for builders. The Commerce Department recently proposed another Canadian lumber tariff increase of nearly 30 percent.

Tariffs of up to 24 percent on Canadian softwood lumber were imposed in April by the Commerce Department in a continuing trade dispute with the neighbor to the north. And then at the end of last month, the US imposed additional tariffs of over 7 percent on Canadian imported lumber.

The higher lumber costs are already having an impact on the housing market and impeding builders’ abilities to hasten their production pace, according to NAHB.

“This is hurting housing affordability even as consumer interest in the new-home market remains strong,” says NAHB Chairman Granger MacDonald.

But as builder confidence sank, housing starts rebounded — particularly for single-family homes. Nationally, housing starts grew over eight percent in June to a seasonally adjusted annual rate of 1.22 million units, based on newly released data from the Commerce Department and The United States Department of Housing and Urban Development (HUD).

Meantime, single-family housing starts were up over six percent to a seasonally adjusted annual rate of 849,000 units. This was not only above May’s “below trend” reading of 799,000 units, but the second highest rate of the year, according to NAHB.

Single-family homes continue to be in high demand but in short supply nationwide as the country grapples with tightening inventory. June’s reading could be an encouraging sign for the single-family market.

“The gradual growth in single-family starts in 2017 is in line with our forecast, and we should see this sector continue to strengthen throughout the year as consumers show interest in the housing market,” says NAHB Chief Economist Robert Dietz.

Click here to read the report on builder confidence, and here for the report on housing starts.

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