The NAHB/Wells Fargo Housing Market Index, a measure of builder confidence based on a monthly survey, rose by one point to 84 in February. According to the NAHB, this relatively steady number reflects both the positive influence of strong buyer demand and the struggles related to supply chain shortages and a new spike in lumber prices.
“Lumber prices have been steadily rising this year and hit a record high in mid-February, adding thousands of dollars to the cost of a new home and causing some builders to abruptly halt projects at a time when inventories are already at all-time lows,” says NAHB chairman Chuck Fowke. “Builders remain very focused on regulatory and other policy issues that could price out households seeking new homes in a tight market this year.”
The NAHB/Wells Fargo HMI is calculated based on survey responses across three metrics, where any number over 50 indicates that more builders view conditions as good than as poor. The index gauging current sales conditions has held steady at 90 for February, while the component measuring sales expectations for the next six months fell three points to 80, and the index charting traffic of prospective buyers rose four points to 72.
At the regional level, the Northeast HMI rose two points to 78. The Midwest HMI fell one point to 81, the South fell two points to 84, and the West fell two points to 93.
“Demand conditions remain solid due to demographics, low mortgage rates and the suburban shift to lower cost markets, but we expect to see some cooling in growth rates for residential construction in 2021 due to cost factors, supply chain issues, and regulatory risks,” says NAHB Chief Economist Robert Dietz. “Some builders are at capacity and may not be able to expand production due to these headwinds.”
