Dive Brief:

• In its highest reading since May, builder confidence in the market for new single-family homes rose four points in October to a reading of 68, according to the National Association of Home Builders/Wells Fargo Housing Market Index.
• This score suggests home builders are recovering from preliminary aftershocks following Hurricanes Harvey and Irma, though they will still face long-term repercussions such as material price increases and compounded labor shortages. The organization expects the new home market to continue to strengthen.
• Each of the index's three sub-indices ramped up in October, with current sales conditions rising five points to a mark of 75, sales expectations for the next six months increasing five points to 78 and buyer traffic inching up one point to 48. 

Dive Insight:

Builders have been keeping their eyes on the steady increase in material price costs, and the recent natural disasters are set to continue driving these prices up even more. Drywall could be among the first materials to see a rise as a direct result of the hurricanes with remodeling likely being among the first projects in Texas and Florida, driving demand for the material. Concrete and framing lumber — materials associated with larger projects — will follow that price ascent as the larger projects that necessitate those materials, but take longer to begin, get underway.

Lumber prices overall have soared 22% since the beginning of last year. But not all materials costs are rising that quickly. The Bureau of Labor Statistics earlier this year reported a 4.8% increase in material prices from February 2016 to February 2017. That rise was particularly acute after 2015 and 2016 saw material price declines of 3.5% and 2.7%, respectively.

Though it is time intensive, companies can consider deconstruction as a way to reuse materials and take the edge off high input prices. Rather than demolishing a structure, crews take it apart piece by piece to reuse building materials, including wood, steel, windows, fixtures and brick. Still, that process is labor intensive and, in an industry already feeling pressure from the ongoing skilled labor shortage, deconstruction may not be builders' ideal method of securing project materials.

Despite rising material prices and a shortage of qualified workers, industry observers are hopeful about the new home market's future. Builders will still face the typical up-and-down nature of the housing market, though rebuilding efforts in the U.S. South and in the areas of California ravaged by wildfires could continue to buoy confidence in that market.