Buyer demand is up; but builder sentiment continues to slide as it faces headwinds with production supply shortages and costs.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) showed a one-point dip in confidence versus January, now at 82. Nevertheless, that index score hasn’t dipped below a very solid 80 (out of a possible 100) over the past five months, indicating that the hot housing market, despite its challenges, is keeping spirits high.
Like everything in real estate, the index is about location, location, location. For the three-month regional HMI scores, the Northeast increased three points to 76, the West rose one point to 89, the Midwest fell one point to 73 and the South edged one point lower to 86.
The HMI index gauging current sales conditions increased one point to 90, the gauge measuring sales expectations in the next six months fell two points to 80, and the component charting prospective buyers saw a four-point decline to 65.
The takeaway:
“Production disruptions are so severe that many builders are waiting months to receive cabinets, garage doors, countertops and appliances,” said NAHB chairman Jerry Konter, a builder and developer from Savannah, Georgia. “These delivery delays are raising construction costs and pricing prospective buyers out of the market. Policymakers must make it a priority to address supply chain issues that are harming housing affordability.”
“Residential construction costs are up 21% on a year-over-year basis, and these higher development costs have hit first-time buyers particularly hard,” said NAHB chief economist Robert Dietz. “Higher interest rates in 2022 will further reduce housing affordability even as demand remains solid due to a lack of resale inventory.”
