Builders remain extremely confident, but NAHB blamed a one point drop in its confidence index on inflation and the rising cost of raw materials.

WASHINGTON – A four-month rise in National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) ended this month.

However, the one point drop – from December’s 84 to January’s 83 – means that builders remain extremely confident, since 50 is the mean number, with anything above meaning optimism and anything below meaning pessimism.

According to NAHB, growing inflation concerns and ongoing supply chain disruptions snapped the four-month rise in builder sentiment even as consumer demand remains robust. The HMI has hovered at the 83 or 84 level, the same rate as spring 2021, for the past three months.

“Higher material costs and lack of availability are adding weeks to typical single-family construction times,” says NAHB Chairman Chuck Fowke. “NAHB analysis indicates the aggregate cost of residential construction materials has increased almost 19% since December 2021. Policymakers need to take action to fix supply chains. Obtaining a new softwood lumber agreement with Canada and reducing tariffs is an excellent place to start.”

“The HMI data was collected during the first two weeks of January and does not fully reflect the recent jump in mortgage interest rates,” adds 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.”

The HMI index gauging current sales conditions held steady at 90, the gauge measuring sales expectations in the next six months fell two points to 83, and the component charting traffic of prospective buyers 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.

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Author: kerrys