Homebuilder confidence inched up in September for the first time in three months, as the cost of softwood lumber and some other building materials eased.
But builders still have concerns about labor shortages in the construction industry, and rising home prices that could hurt demand, the National Association of Home Builders said in releasing the results of a monthly survey of builders.
“The single-family building market has moved off the unsustainably hot pace of construction of last fall and has reached a still hot but more stable level of activity, as reflected in the September HMI,” said NAHB Chief Economist Robert Dietz, in a statement. “While building material challenges persist, the rate of cost growth has eased for some products, but the job openings rate in construction is trending higher.”
The NAHB/Wells Fargo Housing Market Index rose one point in September, to 76. When the index is above 50, that means more builders think conditions are good than poor.
NAHB/Wells Fargo Housing Market Index (HMI). Source: National Association of Home Builders.
During the recession and housing crash of 2007-2009, the HMI bottomed out at eight points in January 2009, and didn’t climb above 50 until June, 2013.
On the eve of the pandemic, the HMI was just one point of its 1999 record high of 77, registering a 76 reading in December, 2019. When the pandemic hit in March, 2020, the index plummeted to 30 the following month, amid uncertainty about how the economy would weather the storm.
The index quickly rebounded, as builders scrambled to meet pent-up demand for homes, eventually hitting 90 in November, 2020 — an all-time high in records dating to 1985. Although the HMI drifted back below 80 this summer, builder confidence remains about as high as it was right before the pandemic.
In their latest forecast, Fannie Mae economist project new home sales will grow by 11.5 percent next year, to 881,000. Existing home sales, on the other hand, are expected to fall by 3.6 percent, to 5.676 million.
Regionally, the West has been posting the strongest builder confidence numbers, although looking at a three-month moving average, the region dropped two points, to 83. The South dropped two points, to 80, while the Northeast fell two points to 72. The three-month moving average for the Midwest remained unchanged at 68.
A component of the HMI index gauging current sales rose one point to 82, the component measuring traffic of prospective buyers was up two points to 61, and the gauge of sales expectations over the next six months was unchanged at 81.
“Exurban markets have expanded the most over the last year, although inner suburbs are now experiencing an acceleration, with townhouse construction having had the best quarter in 14 years this spring,” Dietz said.