Builders’ confidence in the market for newly built single-family homes fell four points to 86 in December, marking the second-highest reading in the history of the NAHB/Wells Fargo Housing Market Index. This ends a three-month string of record-high readings, culminating last month with a reading of 90.
“Builder confidence fell back from historic levels in December, as housing remains a bright spot for a recovering economy,” says Robert Dietz, NAHB chief economist. “The issues that have limited housing supply in recent years, including land and material availability and a persistent skilled labor shortage, will continue to place upward pressure on construction costs. As the economy improves with the deployment of a COVID-19 vaccine, interest rates will increase in 2021, further challenging housing affordability in the face of strong demand for single-family homes.”
The NAHB/Wells Fargo HMI is derived from a monthly builder survey that the NAHB has been conducting for 35 years. The HMI gauging current sales conditions dropped four points to 92 in December, while the index gauging sales expectations in the next six months fell four points to 85 and the index measuring traffic of prospective buyers fell four points to 73.
In the three-month moving averages for regional HMI scores, the Northeast region fell by one point to 82, while the Midwest rose one point to 81, the South rose one point to 87, and the West rose two points to 96.
“Housing demand is strong entering 2021, however the coming year will see housing affordability challenges as inventory remains low and construction costs are rising,” says NAHB chairman Chuck Fowke, a custom home builder from Tampa, Florida. “Policymakers should take note to avoid increasing regulatory costs associated with land development and residential construction.”
