Builder Confidence Edges Up as Strong Demand Offsets Supply-Side Challenges

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Strong buyer demand pushed builder confidence up in April even as builders continued to grapple with rising lumber prices and supply chain issues and consumers faced higher home prices due to a lack inventory. The latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) shows that builder confidence in the market for newly built single-family homes rose one point to 83 in April.

 

Despite strong buyer traffic, builders continue to face challenges to add much needed housing supply to the market. The supply chain for residential construction is tight, particularly regarding the cost and availability of lumber, appliances, and other building materials. While mortgage interest rates have trended higher since February and home prices continue to outstrip inflation, housing demand appears to be solid for now as buyer traffic reached its highest level since November. NAHB’s forecast is for ongoing growth in single-family construction in 2021, albeit at a lower growth rate than realized in 2020.

Derived from a monthly survey that NAHB 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 increased one point to 88 and the gauge charting traffic of prospective buyers posted a three-point gain to 75. The component measuring sales expectations in the next six months fell two points to 81.

Looking at the three-month moving averages for regional HMI scores, the Northeast rose six points 86 and the South moved up one point to 83. The West held steady at 90 and the Midwest fell two points to 78.

The HMI tables can be found at nahb.org/hmi.

 



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