The chronic labor shortage will likely persist and have an even greater impact on builder confidence than lumber prices in the near term, reports National Association of Home Builders in a report issued Monday.
Nonetheless, the group’s NAHB/Wells Fargo Housing Market Index (HMI) builder confidence index inched up one point in September to 76 on lower lumber prices and strong housing demand, even as the housing sector continues to grapple with building material supply chain issues and labor challenges.
This snapped a three-month decline. The index had been cooling in general since it hit a peak of 90 in November.
“The September data show stability as some building material cost challenges ease, particularly for softwood lumber,” NAHB Chairman Chuck Fowke, a custom home builder from Tampa, Fla., said in a release. “However, delivery times remain extended and the chronic construction labor shortage is expected to persist as the overall labor market recovers.”
NAHB Chief Economist Robert Dietz said, “The single-family building market reached a still hot but more stable level of activity, as reflected in the September HMI. While building material challenges persist, the rate of cost growth has eased for some products, but the job openings rate in construction is trending higher.”
Growth Expected in the South, West and Mountain West
NAHB expects housing affordability will be a key demand-side challenge in the coming quarters, given the rapid rate of growth for home prices and construction costs over the last year.
“Regionally, we continue to see growth in the South and the West, particularly the Mountain West,” said Dietz. “Exurban markets have expanded the most over the last year, although inner suburbs are now experiencing an acceleration, with townhouse construction having had the best quarter in 14 years this spring.”
Derived from a monthly survey that NAHB has been conducting for 35 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.”
The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
The HMI index gauging current sales conditions rose one point to 82, the component measuring traffic of prospective buyers posted a two-point gain to 61 and the gauge charting sales expectations in the next six months held steady at 81.
Looking at the three-month moving averages for regional HMI scores, the Northeast fell two points to 72, the South dropped two points to 80 and the West registered a two-point decline to 83. The Midwest remained unchanged at 68.
In last month’s HMI, higher construction costs and supply shortages along with rising home prices pushed builder confidence to its lowest reading since July 2020 when builder sentiment in the market for newly built single-family homes fell five points to 75 in August.