Builder Sentiment Dips Below 80 for First Time Since September ’21

March 16, 2022 from Floor Focus FloorDaily News

Washington, DC, March 16, 2022 – Builder confidence in the market for newly built single-family homes moved two points lower to 79 in March from a downwardly revised reading in February, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

This is the fourth straight month that builder sentiment has declined, and the first time that the HMI has dipped below the 80-point mark since last September. Ongoing lumber and building material supply-side constraints and rising construction costs and expectations of higher interest rates continue to negatively affect builder sentiment even as buyer demand remains relatively solid.

While builders continue to report solid buyer traffic numbers, helped by historically low existing home inventory and a persistent housing deficit, increasing development and construction costs have taken a toll on builder confidence.

The March HMI recorded the lowest future sales expectations in the survey since June 2020. Builders are reporting growing concerns that increasing construction costs (up 20% over the last 12 months) and expected higher interest rates connected to tightening monetary policy will price prospective home buyers out of the market. While low existing inventory and favorable demographics are supporting demand, the impact of elevated inflation and expected higher interest rates suggests caution for the second half of 2022.