Rising Costs Impacting Builder Confidence This Month

Facing increasing costs for building materials and rising concerns about the supply of developed lots and labor, builders registered less confidence in the market for newly built, single-family homes in April, with a two-point drop to 42 on the NAHB/Wells Fargo Housing Market Index (HMI), released last Monday.

Commenting on the latest data, NAHB Chief Economist David Crowe explained that “Supply chains for building materials, developed lots and skilled workers will take some time to re-establish themselves following the recession, and in the meantime builders are feeling squeezed by higher costs and limited availability issues." However, he also noted that builders’ outlook for the next six months has improved "due to the low inventory of for-sale homes, rock bottom mortgage rates and rising consumer confidence."

While the HMI component gauging current sales conditions declined two points to 45 and the component gauging buyer traffic declined four points to 30 in April, the component gauging sales expectations in the next six months posted a three-point gain to 53 – its highest level since February of 2007.

Looking at three-month moving averages for regional HMI scores, the Northeast was unchanged at 38 in April while the Midwest registered a two-point decline to 45, the South registered a four-point decline to 42 and the West posted a three-point decline to 55.