NAHB Builder's Market Updates
Builder Concern Survey
Builder Concern Survey
The National Association of Home Builders (NAHB) stated recently that although the increased price of building materials continues to hamper building affordability, there are other issues that have also arisen. In a survey performed in January regarding the 2022 sentiments of builders, the NAHB received results stating that 96% of builders had issues with building material prices, directly followed by 86% of builders having issues with availability and timing for obtaining those materials.
85% of builders had issues with cost and availability of labor, something that is unsurprising considering that in May of 2022, there were over 400,000 unfilled construction jobs in the United States.
More surprising than labor shortages or high material cost however is the rising concern builders are having with rising interest rates, a problem that now affects 66% of builders. In addition, 85% of builders are concerned about the impacts of inflation on their businesses. Both of these numbers are significantly higher than they were at the same time last year.
https://www.nahb.org/blog/2023/02/materials-remain-top-challenge-for-builders
Housing Affordability
Since mortgage rates began rising in the early months of 2022, along with the continued issues with the building material supply chain, the National Association of Home Builders (NAHB) reports that housing affordability declined all throughout 2022 and has recently reached its lowest level ever since the association began reporting the statistic in 2012.
According to the NAHB/Wells Fargo Housing Index, only 38.1% of new and existing homes sold between October and December of 2022 were affordable by families that earn the median U.S. income of $90,000. This is the third quarterly record low value in a row for housing affordability. Though it has reached such a low value, housing affordability is expected by the NAHB to improve in 2023 along with mortgage rates being expected to improve.
https://www.nahb.org/news-and-economics/press-releases/2023/02/housing-affordability-hits-record-low-but-turning-point-lies-ahead
AIA Architecture Billings Index
The American Institute of Architects (AIA) has noted that while architecture firm billings have declined for four consecutive months as of January 2023, the decline is slowing at this point. As reported by the Architecture Billings Index (ABI), a diffusion index derived from a monthly survey that is conducted by the AIA Economics and Market Research Group, the ABI score reached a value of 49.3. This means that fewer architecture firms indicated declining conditions in January than in December of last year which had a score of 48.4. It is important to note that a score of 50 indicates no change in billings, so both of the reported scores for January and December saw slight decreases in billings.
In terms of the overall economy, the AIA stated that the Federal Reserve is targeting inflation at around 2% which will mean interest rate hikes in the coming months, especially March and May. The Consumer Price Index (CPI) rose by 0.5% in January to an annualized pace of 6.4%, a level higher than the fourth quarter of last year.
https://www.aia.org/pages/6596717-abi-january-2023-architecture-firm-billing
NAHB Builder Confidence
The National Association of Home Builders (NAHB) reported that there have been two months of gains for builder confidence, caused partially by better mortgage rates, that could mean housing is turning a corner toward the green. Even as high construction costs and the persistent issues with the supply chain continue to cause problems, builder confidence rose during the month of February to 42 points, up from 35 points last month. This data comes from the NAHB/Wells Fargo Housing Market Index (HMI) and is the strongest reading since September of 2022, though it is still below the break-even point at 50.
NAHB Chief Economist, Robert Dietz, summarized the findings from this month's builder confidence reading, "Even as the Federal Reserve continues to tighten monetary policy conditions, forecasts indicate that the housing market has passed peak mortgage rates for this cycle. And while we expect ongoing volatility for mortgage rates and housing costs, the building market should be able to achieve stability in the coming months, followed by a rebound back to trend home construction levels later in 2023 and the beginning of 2024."
This recent data shows that the housing market is beginning to show signs of stabilizing after declining most of the previous year. 31% of builders reduced home prices in February, down four percent from December. Meanwhile, 57% of builders offered incentives for buying houses in February, which is down from 62% in December.
The HMI posted upticks in all three indexes, current sales interest rose to 46, sales expectations rose to 48, and the traffic of prospective buyers rose to 29. Regional HMI scores also increased across the board with the Northeast, the Midwest, the South, and the West all seeing increases in their HMI scores.
https://www.nahb.org/news-and-economics/press-releases/2023/02/cautious-optimism-for-builders-in-february
