Builder Confidence Edges Lower on Inflation Concerns
Growing inflation concerns and ongoing supply chain disruptions snapped a four-month rise in builder sentiment even as consumer demand remains robust. Builder confidence in the market for newly built single-family homes moved one point lower to 83 in January, according to the National Association of Home Builders/Wells Fargo Housing Market Index. 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," says Chuck Fowke, NAHB chairman. "NAHB analysis indicates the aggregate cost of residential construction materials has increased almost 19 percent 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."
"The HMI data was collected during the first two weeks of January and do not fully reflect the recent jump in mortgage interest rates," says Robert Dietz, NAHB chief economist. "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."
The HMI index gauging current sales conditions held steady, the gauge measuring sales expectations in the next six months fell two points, and the component charting traffic of prospective buyers also posted a two-point decline.