Home Builder Confidence Grows But Concerns Remain

The confidence of home builders is up, but they are still worried.

Overall builder sentiment rose four points to 80 in October, according to the National Association of Home Builders/Wells Fargo Housing Market Index.

The index gauging current sales conditions rose five points to 87, the component measuring sales expectations in the next six months posted a three-point gain to 84 and the gauge charting traffic of prospective buyers moved four points higher to 65.

Regionally the HMI, rose one point in the Midwest to 69, the Northeast held steady at 72, the South and West each remained unchanged at 80 and 83, respectively.

These measures don’t necessarily fully reflect the challenges facing home builders however.

“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 custom home builder from Tampa, Fla.

To ease pressure on prices and the supply of building materials, NAHB Chief Economist Robert Dietz said policy makers must focus on fixing the broken supply chain.

Meanwhile, commodity prices are expected to continue their upward trajectory. 

“The biggest driver of wood usage and housing and demand for multifamily has to do with the demographics in the US right now,” Joe Sanderson, managing director and chief executive officer of natural resources, told GlobeSt.com in a recent interview. “The millennial generation is becoming home-buying age, which happens around average age 33.”

“You’ll see lumber prices will go say from $400 per thousand board feet to maybe $650, maybe $700 per thousand,” Sanderson adds. That will go through the end of this year into the early or middle part of 2022.