Builders Confident, but Concerned About Affordability

Even amid continued supply shortages and rising prices, homebuilders feel confident in the industry due to continued high consumer demand.

The National Association of Home Builders found that builder confidence reached 80, based on builders’ perceptions of current market conditions for the sale of new homes, as well as in the next six months and the traffic of potential buyers of new homes. Builders reported feeling most confident about current single-family home sales, up five points from September, followed by single -family home sales over the next six months, up three points from September and then traffic of prospective buyers, up four points from September. Up four points from September, October was still below a high of 90 in November 2020.

“Builders are getting increasingly concerned about affordability hurdles ahead for most buyers,” said NAHB Chief Economist Robert Dietz. “Building material price increases and bottlenecks persist and interest rates are expected to rise in coming months as the Fed begins to taper its purchase of U.S. Treasuries and mortgage-backed debt. Policymakers must focus on fixing the broken supply chain. This will spur more construction and help ease upward pressure on home prices.”

Additionally, there are concerns about a future labor shortage as many industries struggle to find enough employees.

As the market cools ever so slightly, housing starts have remained consistent, down slightly (1.6%) in September from August (the latest data available). Single-family starts remained the same, while multifamily starts saw a drop. Single-family home starts are up 20.5% from last September, however, the NAHB pointed out that summer 2020 was lower due to the pandemic. Currently, there are 712,000 single-family homes under construction, up 31% from a year ago, while there are 714,000 apartments under construction, up 6% from a year ago. Overall, total housing units under construction is up 17% year to year.