Homebuilder sentiment dropped two points in March, marking the first time since September the measurement has dipped below 80, according to the National Association of Homebuilders.

Supply chain constraints, rising inflation, and interest rate hikes all continue to drive homebuilder confidence downward, with confidence dipping for the fourth-consecutive month in March.

Homebuilder sentiment in the market for newly built single-family homes dropped two points to 79 in March, marking the fourth-straight month of declines and the first time since September the measurement has dipped below 80, according to the National Association of Homebuilders/Wells Fargo Housing Market Index released March 16.

“While builders continue to report solid buyer traffic numbers, helped by historically low existing home inventory and a persistent housing deficit, increasing development and construction costs have taken a toll on builder confidence,” NAHB Chairman Jerry Konter said in a statement. “Improving access to lumber, OSB and other materials will help builders increase the supply of badly-needed housing and fight inflation.”

While any rate above 50 is considered positive, the continued decline suggests homebuilders are waiting for supply chain issues to be resolved before adjusting their outlook, while builders wait months for essentials like cabinets and garage doors. Inflation affecting construction materials and rising interest rates are also dampening builders’ expectations for future sales, according to the NAHB.

“The March HMI recorded the lowest future sales expectations in the survey since June 2020, said NAHB Chief Economist Robert Dietz. “Builders are reporting growing concerns that increasing construction costs (up 20% over the last 12 months) and expected higher interest rates connected to tightening monetary policy will price prospective home buyers out of the market. While low existing inventory and favorable demographics are supporting demand, the impact of elevated inflation and expected higher interest rates suggests caution for the second half of 2022.”

The index is extracted from a monthly survey of NAHB members across the nation that gauges member sentiment on sales, sale expectations and the rate of traffic of prospective buyers.

The index tracking just current sales conditions dropped three points to 86, and the index tracking sales expectations for the next six months plunged ten points, while traffic of prospective buyers charted a two point increase, according to the NAHB.

Regionally, builder sentiment in the Northeast dropped seven points to 69, the Midwest dropped one point to 72, while the South fell three points to 83 and builders in the West moved up one point to 90.

Email Ben Verde

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