Home Builder Confidence Builds Stronger For Fourth Consecutive Month

 

Homebuilder sentiment was strong at the end of 2021 according to the NAHB/Wells Fargo Housing Market Index (HMI). This is good news for the home building market despite the inflation scares and material shortages. The NAHB/Wells Fargo Housing Market Index (HMI) reported the builder sentiment in the market for newly-built single-family homes moved one point higher to 84 in December.

As for the regions, the three-month moving averages for regional HMI scores rose in all of the four regions. Both the West and South saw an increase to 87, and the Northeast and Midwest both were are 74. The seasonally adjusted rates for the four regions were the highest in the South at 89, in the West 87, in the Northeast 79, and in the Midwest at 74.

“While demand remains strong, finding workers, predicting pricing and dealing with material delays remains a challenge,” said NAHB Chairman Chuck Fowke. “Policymakers need to work on supply chain improvements and controlling costly inflation. Addressing lumber tariffs would be a good place to start.”

“The most pressing issue for the housing sector remains lack of inventory,” said NAHB Chief Economist Robert Dietz. “Building has increased but the industry faces constraints, namely cost/availability of materials, labor and lots. And while 2021 single-family starts are expected to end the year 24% higher than the pre-Covid 2019 level, we expect higher interest rates in 2022 will put a damper on housing affordability.”

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Home Purchases Are Still On the Rise

Even though we saw a slight decrease in April, home purchases are still going strong. The Mortgage Bankers Association’s (MBA) Weekly Application Survey shows that purchase activity rose 5.3% with an even higher year-over-year the week of May 29.

The ongoing economic and virus challenges didn’t stop housing demand which boasted a rise in home-buying activity compared to last year. A big part of the increase is the record low in mortgage rates. The Primary Mortgage Market Survey’s 30-year fixed-rate mortgage shows a decrease by 5 basis points which keeps the ongoing record low.

The survey shows that home purchase applications have been increasing for five consecutive weeks. In fact, the National Home Builders Association (NAHB) predicts that the housing industry will be a leading sector when it comes to the country’s economic recovery. Fannie Mae reports, “the refinance volume of applications is poised to reach a 17-year high as it forecasts mortgage rates to tumble further.”

The HMI, which indicates builders’ confidence, showed a sturdy gain in May. According to the current National Association of Home Builders/Wells Fargo Housing Market Index (HMI) when it comes to newly-built single-family homes builder confidence rose seven points to 37 last month. The HMI index also showed an increase in sales conditions to 42, a 46 for the component measuring sales expectations in the next six months and 21 for the measure charting traffic of prospective buyers.

Across the regions the HMI scores’ monthly average increased 7 points in the Midwest to 32, in the South, it rose eight points to 42 and in the West a 12 point increase to 44. The only region which saw a decrease was the Northeast which fell 2 points to 17.


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