Dec 19, 2020
Home Builder Confidence Drops for Month of December
After three months of record highs, the latest reports are indicating that builder confidence in the market for single-family homes is falling.
“The National Association of Home Builders’ monthly confidence index dropped four points to a reading of 86 in December, the trade group said.”
NAHB Chief Economist Robert Dietz stated, “Builder confidence fell back from historic levels in December, as housing remains a bright spot for a recovering economy.”
Housing demand is facing intense pressure entering 2021, as inventory is reaching record lows. Because of this short supply, builders are faced with rising costs for supplies and building costs.
The NAHB/ Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” Scores are then calculated for an adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
“The issues that have limited housing supply in recent years, including land and material availability and a persistent skilled labor shortage, will continue to place upward pressure on construction costs, “ said Robert Dietz.
Lumber prices surged by 110% according to the National Association of Home Builders, which directly increases the price of new single-family home prices and apartment prices.
Recent vaccine distribution has also reflected a possible increase in interest leaving economists worried about further housing affordability.
Any increase in interest rates will hurt buyers who struggle this year with owning a home.
Dietz explained, “As the economy improves with the deployment of a Covid-19 vaccine, interest rates will increase in 2021, further challenging housing affordability in the face of strong demand for single-family homes.”
Affordability will continue to be an issue as inventory continues to remain slow and as home prices continue to go up.
“According to the Mortgage Bankers Association, the average rate on the popular 30 years fixed mortgage dropped to another record low last week, the 15th record low set so far this year.”
This has allowed people to consider to sell their properties and move into homes more compatible with the recent changes 2020 has brought.
However, as the economy improves economists fear that interest rates will eventually go up causing a stalled housing market.
Realtor.com is stating, “To some extent, this could be a reflection, of buyers growing accustomed to low mortgage rates, meaning that cheap financing is no longer providing the same boost to the market.”
Realtor.com is suggesting that builders are just responding to buyers who are currently not buying homes as much as they previously were.
The housing market continues to become a reflection of the current state of the economy and these latest reports could be a reflection of how the demands are here to stay.
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