A combination of rising material costs, inventory holdups and labor shortages are putting a damper on homebuilder sentiment, which is affecting the promo companies that serve them.

According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index, business sentiment among single-family homebuilders fell five points last month to 75. While still considered positive, it’s the lowest reading since July 2020 and three points down year over year. Indices for current sales conditions and prospect buyer traffic both fell.

The main challenges: material costs and not enough workers to build the homes, which are resulting in price increases and in turn, slowing buyer demand. The NAHB says it’s seeing some of the lowest affordability levels in nearly a decade.

Lumber prices, while they skyrocketed this year, have fallen to their lowest since July 2020, but it’s the cost of other building essentials, like flooring, drywall, appliances and windows, that’s hampering housing starts and completions.

The promo industry is feeling the pinch too. Sales reps for Top 40 distributor Jack Nadel International (asi/279600) with housing supply clients say it’s been a tough few months.

“It’s a problem for them,” says President Craig Nadel. “They expect to be way down compared to last year.”

Mike Fossano, vice president of account services at Premier Communications Group (asi/298496), says ups and downs in the homebuilding market affect their clients that include architects, contractors, appraisers and real estate agents. “Lumber prices have come down a bit, so that’s promising,” he says. “But staff and materials are still all out of whack. It will correct itself, we’re just not sure when.”

Also affecting homebuilder sentiment: the ability to actually complete a home. Fossano says there have been many situations recently where the buyer has pre-purchased a house yet to be built and just as they expect to move in, they get the bad news that there’s no refrigerator because a single part is on backorder for six months. “They’re angry and the agent hears about it,” says Fossano. “Inventory is still very tight.”

In Saskatchewan, it’s a similar situation. Mike Yager, president of Spotlight Sport & Corporate Wear (asi/332753), says they serve clients in the trades, such as contractors, plumbers and electricians. They’ve been busy recently as people improve their existing residences, but new home traffic has slowed.

“They’re feeling some pinch due to supply and demand issues,” says Yager, “but those working on renovations are keeping busy.”

In April, a frenzied spring market in North American real estate, powered by low inventory levels and high demand from buyers, saw extreme highs in housing prices. While prices have cooled off, those promo firms that serve the housing market and related industries with client gifts and various marketing items, say demand for products is still high.

“We tell our clients that it’s valuable to keep their name out there,” says Fossano. “Keeping a brand top of mind sparks ideas with their customers. They know the show must go on, so we’re meeting them where they are, which still includes a lot of drop-shipping while people continue to work from home and there aren’t many events and trade shows yet.”