Builder confidence improved slightly in September amid lower lumber prices and strong housing demand, even while supply chain and labor challenges persist. After a three-month decline, builder sentiment for newly built single-family homes increased by one point to 76 in September, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
Key findings:
– The HMI index gauging current sales conditions increased one point to 82
– The index measuring traffic of future buyers increased by two points to 61
– The index forecasting sales expectations in the next six months held firm at 81
– For the three-month moving averages for regional HMI scores, all regions except one decreased. The Northeast fell two points to 72, the South dropped two points to 80 and the West decreased two points to 83. The Midwest remained flat at 68.
The takeaway:
NAHB expects housing affordability will be a key demand-side challenge in the near future, due to the rapid home price-growth and rising construction costs over the last year.
“Builder sentiment has been gradually cooling since the HMI hit an all-time high reading of 90 last November,” said NAHB Chairman Chuck Fowke in a statement. “The September data show stability as some building material cost challenges ease, particularly for softwood lumber. “However, delivery times remain extended and the chronic construction labor shortage is expected to persist as the overall labor market recovers.”
“The single-family building market has moved off the unsustainably hot pace of construction of last fall and has reached a still hot but more stable level of activity, as reflected in the September HMI,” said NAHB Chief Economist Robert Dietz in a statement. “While building material challenges persist, the rate of cost growth has eased for some products, but the job openings rate in construction is trending higher.”
“Regionally, we continue to see growth in the South and the West, particularly the Mountain West,” added Dietz. “Exurban markets have expanded the most over the last year, although inner suburbs are now experiencing an acceleration, with townhouse construction having had the best quarter in 14 years this spring.”
