Builder Sentiment Strong at Year’s End

Facebooktwitterpinterestlinkedinmail

Despite inflation concerns and ongoing production bottlenecks, builder confidence edged higher for the fourth consecutive month on strong consumer demand and limited existing inventory. Builder sentiment in the market for newly built single-family homes moved one point higher to 84 in December, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). This ties the highest reading of the year that was posted in February.

The most pressing issue for the housing sector remains lack of inventory. Building has increased but the industry faces constraints, namely cost/availability of materials, labor and lots. And while 2021 single-family starts are expected to end the year 24% higher than the pre-Covid 2019 level, we expect higher interest rates in 2022 will put a damper on housing affordability.

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 rose one point to 90 and the gauge charting traffic of prospective buyers also posted a one-point gain to 70. The component measuring sales expectations in the next six months held steady for the third consecutive month at 84.

Looking at the three-month moving averages for regional HMI scores, the Northeast rose four points to 74, the Midwest posted a two-point gain to 74 and the South and West each posted a three-point rise to 87, respectively.

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



Tags: , , ,

1 reply

  1. I would like to see an article about the specifics of the supply chain issues.

    For example, what specific materials are log jammed, why, what is causing the jam, etcetera.

    I understood from a contractor that the freeze last year in Texas caused facilities in the factories to have pipes freeze with the chemicals that are used for making PVC pipes. Therefore, once the freeze was over, the factory had to rebuild their infrastructure before restarting production. Do I have that correct?

    Is the government move to infrastructure construction depleting the materials of normally available products? It used to be that 8-inch ductile pipe was readily available on a day’s notice. Now contractors are begging us for material substitution solutions because these specific pipes are not available for up to six months. The materials cannot be ordered before the plans are approved by the agencies, and as soon as plans are approved clients want to start construction.

    The agencies have strict materials requirements, and, in the case of the Washington Suburban Sanitary Commission (WSSC), very few options.

    As an aside, WSSC does allow certain PVC to be used for water main construction, but the design requirements are very different from ductile iron for water mains. Use of a different material in this instance would cause the need for the plans to be revised and reapproved.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: