Confidence among the nation’s builders of single-family homes is up for the third straight month despite stubbornly persistent building material bottlenecks and lot and labor shortages.
The share of builders with a positive outlook rose by three points in November for the National Association of Home Builders (NAHB)/ Wells Fargo Housing Market Index.
The portion of the nation index focusing on current sales conditions rose three points to 89 and the gauge charting traffic of prospective buyers also posted a three-point gain to 68. The component measuring sales expectations in the next six months held steady at 84.
Regionally, the overall confidence index for the Midwest rose four points to 72, the South registered a four-point gain to 84 and the West rose one point to 84. However, homebuilder confidence in the Northeast fell two points to 70.
The general upward confidence comes with the continuation of low existing inventories and strong buyer demand.
“In addition to well publicized concerns over building materials and the national supply chain, labor and building lot access are key constraints for housing supply,” said NAHB Chief Economist Robert Dietz. “Lot availability is at multi-decade lows and the construction industry currently has more than 330,000 open positions.”
Earlier this fall, NAHB reported new home sales rose 14% to an 800,000 annualized rate in September. Median prices are up almost 19% year-over-year and existing home sales hit an eight-month high.
On the flip side, overall construction starts ran counter to these trends, mainly owing to a 5% decline for multifamily starts of projects with more than five units. Single-family starts remained flat at a 1.08 million annualized rate.
“Although demand remains strong, higher prices have cooled prospective buyers’ intent to purchase a home,” Dietz said, noting that remodeler confidence remained near all-time highs, at a level of 87 for Q3.
“Meanwhile, higher home values have lifted home equity and household wealth, which is largely supporting the home improvement sector.”
Dietz predicts that supply-chain issues will continue to challenge the economy well into 2022. Prices for residential construction materials have increased 11% so far this year and are now 14% higher than this time last year, and while lumber prices are down 62% from their May peak, they are on yet another upswing.