Home Builder Confidence Drops in January

Inflation and supply chain disruptions have home builders' confidence in the market sinking after holding steady for three months.
Home builders’ confidence in the market is sinking lower as inflation and supply chain disruption persist.

MOBILE, AL (Jan. 20, 2022) — Market confidence is sinking as home builders face growing inflation and ongoing supply chain disruptions.

“Our cost of labor has gone up 8 percent year-over-year, and now with inflation, interest rates are going up. We’re not facing headwinds right now — we’re looking into the teeth of a superstorm,” National Association of Homebuilders CEO Jerry Howard told Fox Business Tuesday.

Homebuilding demand remains high, but home builder confidence dropped one point in January, from 84 to 83, according to the NAHB/Wells Fargo Housing Market Index.

“Higher material costs and lack of availability are adding weeks to typical single-family construction times,” NAHB Chairman Chuck Fowke said.

Fowke also said the overall cost of residential construction materials increased almost 19 percent since December 2020.

About the NAHB/Wells Fargo Housing Market Index

The NAHB/Wells Fargo HMI asks builders to rank market factors for the next six months as “good,” “fair” or “poor.”

The survey also asks about the traffic rate of prospective buyers as “high to very high,” “average” or “low to very low.”

Scores for each are seasonally adjusted, and any index number over 50 indicates more builders view conditions as good than poor.

The HMI has hovered at the 83 or 84 level, the same rate as the spring of 2021, for the past three months. 

Takeaways from the NAHB/Wells Fargo Housing Market Index

  • The HMI for gauging current sales conditions held steady at 90.
  • Market confidence for sales expectations in the next six months fell two points to 83. 
  • The part that tracks the traffic of prospective buyers also posted a two-point decline to 69.

Three-Month Regional HMI Scores

Looking at the three-month moving averages for regional HMI scores:

  • The Northeast fell one point to 73.
  • The Midwest increased one point to 75.
  • The South and West each posted a one-point rise to 88, respectively.

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