Strong Buyer Demand Keeps Home Builders Optimistic

(Chart courtesy National Association of Home Builders)

MBA NewsLink Staff

Strong buyer demand helped offset supply chain challenges and a surge in lumber prices as builder confidence in the market for newly built single-family homes edged up, the National Association of Home Builders reported yesterday.

(For news on the Mortgage Bankers Association’s Builder Applications Survey, released this morning, see the related story above.)

The NAHB/Wells Fargo Housing Market Index rose by one point to 84. The HMI index gauging current sales conditions held steady at 90, while the component measuring sales expectations in the next six months fell three points to 80. The gauge charting traffic of prospective buyers rose four points to 72.

Regional three-month moving averages showed the Northeast rose two points to 78, the Midwest fell one point to 81, the South dropped two points to 84 and the West posted a two-point loss to 93.

“Demand conditions remain solid due to demographics, low mortgage rates and the suburban shift to lower cost markets, but we expect to see some cooling in growth rates for residential construction in 2021 due to cost factors, supply chain issues and regulatory risks,” said NAHB Chief Economist Robert Dietz. “Some builders are at capacity and may not be able to expand production due to these headwinds.”

“Lumber prices have been steadily rising this year and hit a record high in mid-February, adding thousands of dollars to the cost of a new home and causing some builders to abruptly halt projects at a time when inventories are already at all-time lows,” said NAHB Chairman Chuck Fowke, a custom home builder from Tampa, Fla. “Builders remain very focused on regulatory and other policy issues that could price out households seeking new homes in a tight market this year.”

The index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” Any number above 50 indicates more builders view conditions as good than poor.