Builder Confidence Up, Supported by September’s Single Family Starts

October 29th, 2021 by Editor

The NAHB/Wells Fargo Housing Market Index (HMI) released last week shows sentiment in the market for newly built single-family homes moved four points higher to 80 in October, driven in part by strong consumer demand. The growing affordability challenges stemming from rising material prices and shortages didn’t damper single-family home starts in September, officials said, which the association described as having “held steady.” Declines in multifamily production helped to push overall housing starts in September down 1.6% to a seasonally adjusted annual rate of 1.56 million, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

“Buyers increasingly are planning for longer-term remote work or hybrid work schedules, and/or relocations that arose because of the pandemic, and builders are delivering flexible floor plans and features that accommodate the changing needs of the home as both a place for living but also for working in many cases,” said Kelly Mangold of RCLCO Real Estate Consulting. “Despite the decline in starts this month, sales remained strong indicating that buyers are still seeking new product to meet their ever-evolving needs as the school year begins and households adapt to their ‘new normal’ schedules.”

Which is to say that the challenges facing the industry are far from minor inconveniences.

“Although demand and home sales remain strong, builders continue to grapple with ongoing supply chain disruptions and labor shortages that are delaying completion times and putting upward pressure on building material and home prices,” said NAHB chairman Chuck Fowke. “Single-family construction continued along recent, more sustainable trends in September. Lumber prices have moved off recent lows, but the cost and availability of many building materials continues to be a challenge for a market that still lacks inventory. Policymakers should continue to work to improve supply-chains.”

The September reading of 1.56 million starts is the number of housing units builders would begin if development kept its current pace for the next 12 months. Within this overall number, single-family starts were essentially unchanged from the previous month at a 1.08 million seasonally adjusted annual rate, and are up 20.5% year-to-date.

“Builder confidence increased in October, which confirms stabilization of home construction at current levels,” said NAHB chief economist Robert Dietz. “The number of single-family units in the construction pipeline is 712,000, almost 31% higher than a year ago as more inventory is headed to market. Multifamily construction has expanded as well, with almost a 6% year over year gain for apartments currently under construction.”

Derived from a monthly survey that NAHB has been conducting for 35 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months. Scores above 50 indicate that more builders view conditions as good.

HMI tables can be found at nahb.org/hmi.

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