US Homebuilder Sentiment Rebounds Despite Problems

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Despite supply chain slowdowns and rising housing costs, builder confidence rose 4 points in the last month to 80 on the National Association of Home Builders/Wells Fargo Housing Market Index. Though down from 85 in October 2020 and down from the record high of 90 in November, analysts consider anything above 50 to be positive.

“Although demand and home sales remain strong, builders continue to grapple with ongoing supply chain disruptions and labor shortages that are delaying completion times and putting upward pressure on building material and home prices,” said NAHB Chairman Chuck Fowke, a home builder from Tampa, Florida.

The housing market index measures the current sales condition, the next six months’ sales expectations, and buyer traffic; all three rose. Current sales conditions jumped five points to 87. Sales expectations boosted three more to 84. Finally, buyer traffic climbed 4 points to 65.

But despite any optimism, builders still face the stark truth of price increases in land, labor, and materials.

“Building material price increases and bottlenecks persist, and interest rates are expected to rise in coming months as the Fed begins to taper its purchase of US Treasuries and mortgage-backed debt,” said Robert Dietz, chief economist at the NAHB.

On top of that, the Mortgage Bankers Association expects that the interest rate on a 30-year fixed mortgage, at 3% now, will be up to 4% by the end of 2022.

Regionally, builder sentiment stagnated in the Northeast at 72, and the Midwest only grew by one point to 69. The South remained the same at 80, and the West saw a slight uptick to 83.

Although far from its all-time high, builder confidence, according to the National Association of Home Builders/Wells Fargo Housing Market Index, continues to rise amid declines in building materials availability and increasing mortgage costs.

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