Builder Confidence Drops

Rising material costs and a resurgence of the coronavirus pushed builder confidence down in January, according to the latest NAHB/Wells Fargo Housing Market Index (National Association of Home Builders)

Builder confidence in the market for newly built single-family homes was down three points from December to 83, but was up from last January when the index was at 75.

  • MIDWEST: Saw the smallest decline with a one-point drop in January to 81, however it was up big from last January when the index stood at 67
  • WEST: Saw a slight decline with a four-point drop in January to 92, however it was up from last January when the index stood at 86
  • SOUTH: Saw a slight decline with a five-point drop in January to 82, however it was up from last January when the index stood at 77
  • NORTHEAST: Saw the biggest decline with a ten-point drop in January to 68, however it was up from last January when the index stood at 62

NAHB Chairman Chuck Fowke said in a statement, “Builders are grappling with supply-side constraints related to lumber and other material costs, a lack of affordable lots and labor shortages that delay delivery times and put upward pressure on home prices. They are also concerned about a changing regulatory environment.”

All the HMI indexes decreased in January. The index gauging current sales conditions dropped two points to 90, sales expectations in the next six months fell two points to 83, and traffic of prospective buyers declined five points to 68.

Tyler’s Talking Point: A number above 50 indicates that more builders view conditions as good than poor. So despite slight drops across the board, the data indicates conditions are still quite strong and as long as housing inventory remains at historic lows its hard to believe builder confidence won’t stay elevated.