Home builder confidence edges lower

Home News Home builder confidence edges lower

confidenceWashington D.C—Growing inflation concerns and ongoing supply chain disruptions snapped a four-month rise in home builder sentiment even as consumer demand remains robust, according to the National Association of Home Builders (NAHB). Builder confidence in the market for newly built, single-family homes moved one point lower to 83 in January, according to the NAHB/Wells Fargo Housing Market Index (HMI) released today. The HMI has hovered at the 83 or 84 level, the same rate as the spring of 2021, for the past three months.

“Higher material costs and lack of availability are adding weeks to typical single-family construction times,” said Chuck Fowke, chairman, NAHB. “NAHB analysis indicates the aggregate cost of residential construction materials has increased almost 19% since December 2021. Policymakers need to take action to fix supply chains. Obtaining a new softwood lumber agreement with Canada and reducing tariffs is an excellent place to start.”

According to NAHB chief economist, Robert Dietz, the HMI data that was collected during the first two weeks of January do not reflect the rise in mortgage interest rates. “While lean existing home inventory and solid buyer demand are supporting the need for new construction, the combination of ongoing increases for building materials, worsening skilled labor shortages and higher mortgage rates point to declines for housing affordability in 2022.”

Derived from a monthly survey that NAHB said it has been conducting for 35 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

The HMI index gauging current sales conditions held steady at 90, the gauge measuring sales expectations in the next six months fell two points to 83, and the component charting traffic of prospective buyers also posted a two-point decline to 69.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell one point to 73, the midwest increased one point to 75 and the south and west each posted a one-point rise to 88, respectively.

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