Homebuilder confidence ends year high even as inflation picks up

Workers frame a new home being built by CastleRock Communities in the Sunfield neighborhood of Buda, Texas, U.S., on Wednesday, November 10, 2021.

Matthew Busch | Bloomberg | beautiful pictures

Housing demand is surprisingly strong, even during a typically slower home-buying season, leaving homebuilders feeling increasingly confident.

Builder sentiment in the single-family housing market rose one point to 84 in December, according to the National Association of Builders/Wells Fargo Housing Market Index, or HMI. It was the fourth consecutive increase and equates to February being the highest of the year. Anything above 50 is considered positive sentiment.

The increase comes despite concerns about inflation, supply chain disruptions and ongoing labor shortages. Prices of wallboard, steel, aluminum and plastic construction products, rose sharply in November, according to the producer price index.

“While demand remains strong, finding workers, predicting prices, and dealing with material delays has been a challenge,” said NAHB President Chuck Fowke, a homebuilder from Tampa, Florida. “There are still many challenges.

Builders continue to benefit from an extremely sophisticated supply of existing homes for sale. They also see high demand from investors, as the rental construction sector continues to grow. The number of single-family rental construction starts hitting a quarterly record high in the third quarter of 2021.

There are hurdles ahead, especially as prices have rallied recently. The cost of a newly built home increased 17.5% year over year in October, according to the US Census. Mortgage rates are also expected to rise markedly as the Federal Reserve eases support for mortgage-backed bonds in response to rising inflation.

“While the 2021 single-family start-up amount is expected to end the year 24% higher than pre-Covid 2019 levels, we expect returns Higher rates in 2022 will hamper housing affordability.”

In the three components of HMI, current sales conditions increased one point to 90 and buyer traffic also increased one point to 70. Sales expectations for the next six months were unchanged for the third consecutive month. next at 84.

Looking at the three-month moving average for HMI scores across the region, the Northeast is up 4 points to 74, the Midwest is up 2 points to 74, and the South and West are both up 3 points to 87, respectively. Homebuilder confidence ends year high even as inflation picks up


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