Builder confidence rises on strong demand

demandWashington, DC – Low existing inventories and strong buyer demand helped build builder confidence for the third straight month, even as supply-side challenges – including bottlenecks in building materials and shortages of lots and labor – persist, according to the National Association of Home Builders (NAHB). According to the NAHB/Wells Fargo Housing Market Index (HMI), builder sentiment in the newly built single-family home market rose three points to 83 in November.

“The solid housing market continued into November despite continued supply-side challenges,” said Chuck Fowke, president of NAHB. “Lack of resale inventory coupled with strong consumer demand continues to drive single-family home construction.”

Derived from a monthly survey that NAHB has been conducting for 35 years, the NAHB/Wells Fargo HMI polls builders’ 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 potential buyer traffic as “high to very high,” “medium,” or “low to very low.” The scores for each part are then used to calculate a seasonally adjusted index, with any number above 50 indicating that more builders view the conditions as good than bad.

“In addition to well-publicized concerns about building materials and the national supply chain, access to labor and building lots are the major constraints on housing supply,” said Robert Dietz, chief economist at NAHB. “Plot availability is at a multi-decade low and the construction industry currently has more than 330,000 job openings. Policymakers should focus on solving these issues to help builders produce more homes to meet strong market demand.”

According to NAHB, the HMI index measuring current sales conditions rose three points to 89 and the meter charting the traffic of potential buyers also gained three points to 68. The component that sets sales expectations in the next six months measure, remained stable at 84.

NAHB also found that by looking at the three-month moving averages for regional HMI scores: Midwestern rose four points to 72; the South posted a four-point gain to 84; and the west rose one point to 84. The northeast fell two points to 70.

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