20 Sep 2017
By support

NAHB: Builder Confidence Dips on Hurricane Damage

Housing Analysis

Home builders had less confidence in housing market conditions in September. In the aftermath of Hurricanes Harvey and Irma, builders worried that ongoing shortages of construction labor and materials would worsen.  NAHB Chairman Granger MacDonald said that concerns over labor and building materials were “intensified,” but said that builder confidence was expected to return to high readings once rebuilding is underway.

The National Association of Home Builders Housing Market Index dropped three points to an index reading of 64 with all three component readings lower than they were in August. Builder confidence in current market conditions for new single-family homes dipped for points to an index reading of 70. Builder confidence in housing market conditions over the next six months also dropped points to 74. September’s reading for buyer traffic in new housing developments was one point lower at 47.

Construction Labor and Materials Shortages Expected to Worsen

Home builders have cited shortages of labor and building materials in recent years, but these shortages are expected to grow in coming months due to massive amounts of construction workers needed for rebuilding after severe storm damage and flooding wiped out homes, businesses, and infrastructure. As with the high demand for homes caused by low inventories of homes for sale, labor and materials costs will likely rise as rebuilding begins

The NAHB Housing Market Index measures builder confidence on a scale of 0 to 100. Any reading over 50 indicates that more builders than fewer consider housing market conditions to be in positive territory. While September readings are well within positive territory, approaching winter weather and shortages may cause builder confidence in housing market conditions to decrease.

Regional Builder Confidence Readings Mixed

Three-month rolling average readings for four regions tracked by NAHB had missed results in September. The Northeast posted a one-point gain to 49; the Midwest posted a loss of three points for a reading of 63 and the Southern region posted a one-point loss for a reading of 66. The West posted a two-point gain for a reading of 77.

Future builder confidence readings depend on conditions as storm season continues and winter weather sets in.

16 Jun 2017
By support

NAHB Housing Market Index Slips Two Points in June

Housing Market

The National Association of Home Builders Housing Market Index for June fell by two points to 67 after a revision of May’s reading. Components of the Housing Market Index were lower for June with builder confidence in current market conditions two points lower at 73; June’s reading for builder confidence in market conditions for the next six months also fell two points to 76. Builder confidence in buyer traffic fell two points to 49. According to the Index, any reading over 50 indicates that more builders are confident than those who are not.

Labor and Lot Shortages Continue to Stifle Single–Family Home Building

NAHB Chief Economist Robert Dietz said that builder confidence remains high despite ongoing shortages of buildable lots and skilled labor. Meanwhile, NAHB reported lower readings for its regional 3-month rolling average of home builder confidence. The Northeast region was two points lower at 46; Builder confidence in the Midwest was one point lower at 67 and the Southern region was also one point lower with a 3-month reading of 70. The West had the highest builder confidence with a three-month average reading of 70.

Mortgage and consumer credit interest rates are likely to move higher after the Federal Reserve’s decision to raise its target federal funds rate by 0.25 percent on Wednesday. This was the third uptick for the Fed rate this year. As interest rates and other consumer costs increase, would-be buyers of new homes may be sidelined. Future builder confidence readings could be influenced by a variety of economic factors including employment, interest rates and consumer confidence.

Housing Starts Expected to Lag Behind Pre–Bubble Level

While housing starts are expected to increase to approximately 1.23 million on a seasonally-adjusted annual basis, they are significantly lower than the near 2-million housing starts reported prior to when the housing bubble burst. Analysts noted that the overall economic recovery remains steady with some glitches expected along the way. Closing the gap between builder confidence and housing starts is seen as the solution for easing high demand for homes and unusually low inventories of homes on the market.