US homebuilder confidence

US homebuilder confidence falls in January as inflation persists

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US Homebuilder confidence fell for the first time in four months in January, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released on Tuesday.

The HMI landed at 83, down from December’s reading of 84.

“Higher material costs and lack of availability are adding weeks to typical single-family construction times,” NAHB Chairman Chuck Fowke said in a statement. “NAHB analysis indicates the aggregate cost of residential construction materials has increased almost 19% since December 2020. Policymakers need to take action to fix supply chains,” he added.

“The HMI data was collected during the first two weeks of January and do not fully reflect the recent jump in mortgage interest rates,” said NAHB Chief Economist Robert Dietz. “While lean existing home inventory and solid buyer demand are supporting the need for new construction, the combination of ongoing increases for building materials, worsening skilled labor shortages and higher mortgage rates point to declines for housing affordability in 2022.”

Derived from a monthly survey that NAHB has been conducting for 35 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Of the index’s three components, current sales conditions held steady at 90. Sales expectations in the next six months fell 2 points to 83, and buyer traffic also posted a two-point decline to 69.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell one point to 73, the Midwest increased one point to 75 and the South and West each posted a one-point rise to 88, respectively.