A contractor moves roofing material from a house under construction at the Toll Brothers Cantera residential development at Gale Ranch in San Ramon, California.
David Paul Morris | Bloomberg | Getty Images
Just two months ago, construction companies have never been happier. Buyers ‘demand, driven by the pandemic-induced desire for new, larger homes in the suburbs, had building firms’ sentiment up. Now, the rising cost of home construction is making builders less optimistic.
Builder confidence in the single family home market dropped 3 points in January to 83, according to the NAHB / Wells Fargo Housing Market Index. Anything over 50 is considered positive. Two months ago, the index hit a record high of 90. In January 2019, before the pandemic hit, it was at 75.
“Builders are struggling with supply-side constraints related to wood and other material costs, lack of accessible lots and shortages of labor that delay delivery times and put pressure on house prices,” said the NAHB president , Chuck Fowke, builder from Tampa, Florida.
Of the three components of the index, current sales conditions fell 2 points, to 90. Sales expectations in the next six months fell 2 points, to 83, and buyer traffic fell 5 points, to 68.
“While the real estate sector continues to help boost the economy, limited stock is restricting more robust growth,” said NAHB Chief Economist Robert Dietz. “The scarcity of buildable plots is making it difficult to meet strong demand and rising material prices are far outpacing increases in house prices, which in turn is hampering the accessibility of housing.”
In a three-month moving average for regional HMI scores, sentiment in the Northeast dropped 6 points to 76. It rose 2 points to 83 in the Midwest. In the South, sentiment fell 1 point to 86 and in the West it fell 1 point to 95.