The nation’s homebuilders aren’t seeing any relief from
supply chain issues that have slowed construction recently, but high buyer
demand appears to be making up for it.
Builder confidence in the single-family home construction
market rose 4 points to 80 in October on the National Association of Home
Builders/Wells Fargo Housing Market Index. That is still down from 85 in
October 2020 and from the record high 90 in November of last year. Anything
above 50 is considered positive.
“Although demand and home sales remain strong, builders
continue to grapple with ongoing supply chain disruptions and labor shortages
that are delaying completion times and putting upward pressure on building
material and home prices,” said NAHB Chairman Chuck Fowke, a homebuilder from
Tampa, Florida, in a release.
Of the index’s three components, current sales conditions
rose 5 points to 87. Sales expectations in the next six months increased 3 points
to 84 and buyer traffic climbed 4 points to 65.
The biggest concern for builders now is affordability, as
they raise prices to meet the rising costs of land, labor and materials.
The median price of a newly built home sold in August was
20% higher than August of 2020, according to the U.S. Census. While some of
that is the mix of homes selling — more on the high end of the market — it also
reflects builder increases.
Some builders have actually slowed home sales due to
construction hurdles, as they are concerned they won’t be able to deliver
houses at a normal pace.
Homebuyers are turning more and more to new construction, as
the supply of existing homes for sale continues to be both incredibly lean and
“Building material price increases and bottlenecks persist
and interest rates are expected to rise in coming months as the Fed begins to
taper its purchase of U.S. Treasuries and mortgage-backed debt,” said Robert
Dietz, chief economist at the NAHB.
A forecast just released by the Mortgage Bankers Association
predicts the average rate on the 30-year fixed mortgage will hit 4% by the end
of 2022, up from around 3% now.
Regionally, looking at the three-month moving averages
builder sentiment in the Midwest rose 1 point to 69. In the Northeast it was
unchanged at 72. Both the South and West were also unchanged at 80 and 83,
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