Homebuilders remained optimistic in February but moderated their expectations amid supply-chain issues and rising mortgage rates, according to data from NAHB released Wednesday.

Homebuilders have mostly held steady in their optimism, which dipped modestly for the second month in a row as material shortages and construction delays slowed their ability to meet demand.

Builder confidence dropped from a score of 83 in January to 82 this month, according to the latest Housing Market Index released Wednesday by the National Association of Home Builders.

“Despite strong buyer demand, builder sentiment continued to slip in February as the industry grapples with ongoing building material production bottlenecks that are raising construction costs and delaying projects,” the report reads.

While builders’ outlooks remain quite positive overall — a score over 50 is considered more good than bad — the latest numbers suggest that homebuilders may be waiting for supply-chain issues to resolve before raising their expectations for where the market is headed.

“Production disruptions are so severe that many builders are waiting months to receive cabinets, garage doors, countertops and appliances,” the report states. “These delivery delays are raising construction costs and pricing prospective buyers out of the market.”

These numbers are based on a monthly survey of homebuilders, who are asked to provide their impression of market conditions now and over the next six months. The numbers also incorporate an idea of traffic from prospective buyers.

Builder impressions of prospective buyer traffic dropped to a score of 65 in February, down four points from the previous month’s score.

And while the number of present-day sales ticked up a point, builders expressed slightly less confidence in the sales outlook over the next six months. 

The future sales outlook score dropped to 80 in February, reaching its lowest point since June. Builder sentiment on future sales had been a few points higher during the fourth quarter of 2021.

Still, the numbers reflect an industry that largely feels good about its ability to sell and make a profit in the months ahead.

But as prices on newly built homes continue to rise amid the bottlenecks and delays, many potential homebuyers may not share the rosy outlook.

“Residential construction costs are up 21% on a year over year basis,” the report reads. “Higher interest rates in 2022 will further reduce housing affordability even as demand remains solid due to a lack of resale inventory.”

Builders remained more optimistic about market conditions in the South and West regions of the U.S. than in other parts of the country. In the Northeast and Midwest, builder confidence has eroded substantially since this time last year.

But there were signs of a possible improvement in builder conditions in the Northeast in particular, where NAHB’s three-month average builder confidence score rose three points from January to February.

Email Daniel Houston

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