Builder Confidence slips, but remains strong

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Builder Confidence slips, but remains strong

By HBSDealer Staff - 12/16/2020

After three straight months of record highs, builder confidence has taken a slight step back in December.

Builder confidence in the market for newly-built single-family homes declined four points to 86 this month, according to the latest NAHB/Wells Fargo Housing Market Index (HMI). 

While the latest reading still indicates strong builder sentiment, hurdles are emerging.

“Housing demand is strong entering 2021, however the coming year will see housing affordability challenges as inventory remains low and construction costs are rising,” said NAHB Chairman Chuck Fowke. “Policymakers should take note to avoid increasing regulatory costs associated with land development and residential construction.”

“Builder confidence fell back from historic levels in December, as housing remains a bright spot for a recovering economy,” said NAHB Chief Economist Robert Dietz. “The issues that have limited housing supply in recent years, including land and material availability and a persistent skilled labor shortage, will continue to place upward pressure on construction costs. As the economy improves with the deployment of a COVID-19 vaccine, interest rates will increase in 2021, further challenging housing affordability in the face of strong demand for single-family homes.”

Derived from a monthly survey concocted by the NAHB, scores over 50 indicates that more builders view conditions as good than poor.

The HMI index gauging current sales conditions dropped four points to 92, the component measuring sales expectations in the next six months fell four points to 85 and the gauge charting traffic of prospective buyers also decreased four points to 73.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell one point to 82, the Midwest was up one point to 81, the South rose one point to 87 and the West increased two points to 96.

The full HMI tables can be found at nahb.org/hmi.