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Inflation worries sap builder confidence in January

by John Yellig

Homebuilder sentiment dropped in January as inflation concerns and supply-side challenges broke four months of rising construction-sector confidence, the National Association of Home Builders reported, citing the latest NAHB/Wells Fargo Housing Market Index (HMI).

January’s reading of 83 was down one point from December and does not account for a recent jump in mortgage interest rates, the NAHB said in a press release. The reading has remained at 83 or 84, the same level as Spring 2021, for the past three weeks.

The index’s measure of current sales conditions was flat at 90, while the six-month sales-expectations measurement dipped two points to 83. The buyer-traffic component fell two points to 69.

Regionally, the three-month moving average of the index slid one point in the Northeast to 73, while readings in the Midwest. South and West each rose one point to 75, 88 and 88, respectively.

“Higher material costs and lack of availability are adding weeks to typical single-family construction times,” NAHB Chairman Chuck Fowke said in a press release. “While lean existing-home inventory and solid buyer demand are supporting the need for new construction, the combination of ongoing increases for building materials, worsening skilled labor shortages and higher mortgage rates point to declines for housing affordability in 2022.”

The NAHB/Wells Fargo survey measures builder perceptions of current single-family home sales, as well as 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.” The results are then used to calculate a seasonally adjusted index in which any number over 50 indicates that more builders view conditions as good than poor.

 

 

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