Builder confidence decreases in February

Home News Builder confidence decreases in February

confidenceWashington D.C.—Despite strong buyer demand, builder confidence lowered and builder sentiment continued to slip in February as the industry grapples with ongoing building material production bottlenecks that are raising construction costs and delaying projects, 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 82 in February, marking the second straight month that confidence levels have declined by a single point, according to the NAHB/Wells Fargo Housing Market Index (HMI). Despite these monthly declines, the HMI has posted very solid readings at or above the 80-point mark for the past five months.

“Production disruptions are so severe that many builders are waiting months to receive cabinets, garage doors, countertops and appliances,” said Jerry Konter, chairman, NAHB. “These delivery delays are raising construction costs and pricing prospective buyers out of the market. Policymakers must make it a priority to address supply chain issues that are harming housing affordability.”

Robert Dietz, chief economist, NAHB, said residential construction costs have risen 21% on a year over year basis. “These higher development costs have hit first-time buyers particularly hard,” Dietz said. “Higher interest rates in 2022 will further reduce housing affordability even as demand remains solid due to a lack of resale inventory.”

Derived from a monthly survey that NAHB has been conducting for more than 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.” According to the company, 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 increased one point to 90, the gauge measuring sales expectations in the next six months fell two points to 80, and the component charting traffic of prospective buyers posted a four-point decline to 65.

Looking at the three-month moving averages for regional HMI scores, the northeast increased three points to 76, the west rose one point to 89, the midwest fell one point to 73 and the south edged one point lower to 86, according to the NAHB.

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