Homebuilders are experiencing worsening supply chain problems, which is impacting confidence.
Builder confidence in the single-family, newly built housing market fell 1 point in February to 82 on the National Association of Home Builders/Wells Fargo Housing Market Index. It is the second consecutive month with declines. Anything over 50 is considered to be positive. It was at 84 on February 20, 2021.
NAHB chairman Jerry Konter (a Savannah-based builder) stated that “production interruptions are so severe” and said many builders have been waiting for months to get cabinets, countertops or appliances. Delivery delays have a negative impact on the construction process and are driving potential buyers away from the market.
Surging lumber pricesNew homes can also cost thousands more.
Inflation is a major concern for homeowners. A 30-year fixed rate mortgage with a popular average of 4% has just passed the 4% mark, which is more than a whole percentage point above it was one year ago. Some buyers cannot afford higher rates when they are faced with higher prices for their homes. This is what is driving the current high rental demand.
Robert Dietz (chief economist at NAHB) stated that residential construction costs rose 21% year-over-year and this has made it particularly difficult for first-time buyers. Higher interest rates for 2022 will reduce affordability of housing, even though demand is strong due to low resale inventory.
Today’s sales conditions improved 1 point to 90%, while sales expectations for next 6 months dropped 2 points to 80. The index’s buyer traffic dropped 4 points to 65.
The Northeast saw a 3 point increase in sentiment to 76 on a regional moving average. It rose by 1 point in the West to 89 and fell by 1 point in the Midwest to 73. The South saw a drop in sentiment to 86.