Home builder sentiment ends 2021 on solid ground

While home builders are have been overcoming a number of challenges in 2021, residential construction confidence finished the year on a positive note.

Home builder confidence move one point higher to 84 in December, according to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index.

According to the NAHB, the rise in confidence arrives at time when inflation is causing concerns and home builders are overcoming ongoing production bottlenecks.

The December reading of 84 ties February’s index for the highest level of builder confidence this year.

But more work needs to be done in Washington, the NAHB notes.

“While demand remains strong, finding workers, predicting pricing and dealing with material delays remains a challenge,” said NAHB Chairman Chuck Fowke. “Policymakers need to work on supply chain improvements and controlling costly inflation. Addressing lumber tariffs would be a good place to start.”

The size and supply of the housing market also continues to be a challenge in regard to future industry growth.

“The most pressing issue for the housing sector remains lack of inventory,” said NAHB Chief Economist Robert Dietz. “Building has increased but the industry faces constraints, namely cost/availability of materials, labor and lots. And while 2021 single-family starts are expected to end the year 24% higher than the pre-Covid 2019 level, we expect higher interest rates in 2022 will put a damper on housing affordability.”

The HMI index gauging current sales conditions rose one point to 90 and the gauge charting traffic of prospective buyers also posted a one-point gain to 70. 

The component measuring sales expectations in the next six months held steady for the third consecutive month at 84.

Looking at the three-month moving averages for regional HMI scores, the Northeast rose four points to 74, the Midwest posted a two-point gain to 74 and the South and West each posted a three-point rise to 87.

Additional information for the December HMI can be found here.