Builder Confidence Edges Up as Strong Demand Offsets Supply-Side Challenges

The National Association of Home Builders said strong buyer demand pushed builder confidence up in April, even as builders continued to grapple with rising lumber prices and supply chain issues and consumers faced higher home prices due to a lack inventory.

The NAHB/Wells Fargo Housing Market Index reported builder confidence in the market for newly built single-family homes rose one point to 83 in April. The HMI index gauging current sales conditions increased one point to 88 and the gauge charting traffic of prospective buyers posted a three-point gain to 75. The component measuring sales expectations in the next six months fell two points to 81.

Looking at the three-month moving averages for regional HMI scores, the Northeast rose by six points 86, the South moved up one point to 83, the West held steady at 90 and the Midwest fell two points to 78.

“Despite strong buyer traffic, builders continue to face challenges to add much needed housing supply to the market,” said NAHB Chairman Chuck Fowke. “The supply chain for residential construction is tight, particularly regarding the cost and availability of lumber, appliances, and other building materials. Though builders are seeking to keep home prices affordable in a market in need of more inventory, policymakers must find ways to increase the supply of building materials as the economy runs hot in 2021.”

“While mortgage interest rates have trended higher since February and home prices continue to outstrip inflation, housing demand appears to be unwavering for now as buyer traffic reached its highest level since November,” said NAHB Chief Economist Robert Dietz.

Yesterday, the Mortgage Bankers Association reported its Builder Applications Survey for March showed mortgage applications for new home purchases increased by 7 percent from a year ago. and by 12 percent from February. MBA estimated new single-family home sales at a seasonally adjusted annual rate of 714,000 units in March, based on data from the BAS, a decrease of 4.5 percent from the February pace of 748,000 units. On an unadjusted basis, MBA estimated 72,000 new home sales in March, an increase of 10.8 percent from 65,000 new home sales in February.

This morning, HUD and the Census Bureau will release its New Residential Construction report for March, reporting on housing starts, permits and completions. MBA NewsLink will provide coverage.