A contractor is working on the basement of a home under construction in the Toll Brothers Regency in the Palisades community of Charlotte, North Carolina.
Luke Sharrett | Bloomberg | Getty Images
Buyers’ demand for new build homes continues to rise, which keeps builder confidence high even as building material prices soar.
Builders’ sentiment rose by one point to 84 in February, according to the National Association of Home Builders / Wells Fargo Housing Market Index (HMI) released last Wednesday. Anything over 50 is considered a positive sentiment. The index stood at 74 in February 2020.
“Wood prices have risen steadily this year, reaching an all-time high in mid-February, adding thousands of dollars to the cost of a new home and some builders abruptly halting their projects at a time when inventories have already hit an all-time low. NAHB Chairman Chuck Fowke, a custom home builder from Tampa, Florida. “Builders remain very focused on regulatory and other policy issues that this year could price households looking for a new home in a tight market.”
While house prices are a concern in both the new and existing home market, buyer demand appears to be barely slipping. Of the three components of the index, current sales conditions remained stable at 90, and potential buyer traffic increased four points to 72. However, sales expectations for the next six months dropped three points to 80.
“Demand conditions remain solid due to demographics, low mortgage rates and the shift in suburban markets to lower-cost markets, but we expect residential construction growth rates to cool somewhat in 2021 due to cost drivers, supply chain issues and regulatory risks”, said NAHB chief economist Robert Dietz. “Some builders have the capacity and cannot expand production because of this headwind.”
Regionally, on a three-month moving average, builder sentiment in the Northeast increased two points to 78 and declined one point to 81 in the Midwest. In the south it dropped two points to 84 and in the west two points to 93.