Mortgage News March 10, 2023
In January 2023, the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index revealed that building material prices and availability were still the top problems faced by builders over the past year. However, interest rates, general inflation, and negative media reports had moved up the list of significant issues.
For over three decades, the NAHB has been conducting a monthly survey of single-family builder members to create the NAHB/Wells Fargo Housing Market Index (HMI). The survey aims to evaluate the market conditions for the sale of new homes, including current conditions, expected conditions over the next six months, and the traffic of prospective buyers. The survey results are used to generate a composite index, which gauges the overall strength of the market for new single-family housing.
In response to the January 2023 survey for the NAHB/Wells Fargo Housing Market Index (HMI), builders cited building material prices as the most significant issue in 2022, with 96% of builders reporting it as a problem. The availability and timing to obtain building materials was the second most reported problem, cited by 86% of builders. Both issues topped the list in 2021 as well.
Trading Economics predicts that the cost of lumber will trade at $362.46/1000-board feet by the end of Q1 2023. The cost and availability of labor also remained a widespread problem, reported by 82% of builders in 2021 and 85% in 2022.
According to the Bureau of Labor Statistics (BLS), residential construction employment in November 2022 stood at 3.2 million nationwide, comprising 903,000 builders and 2.3 million residential specialty trade contractors. Residential construction job gains averaged 4,617 a month over the past six months. There were 105,000 net job additions in the home building and remodeling industry over the past 12 months. Since the low point after the Great Recession, residential construction has gained approximately 1,204,500 positions.
In 2022, builders identified several more widespread problems. High-interest rates were a problem for only 2% of builders in 2021, but that number jumped to 66% in 2022. Builders polled by the NAHB anticipate high-interest rates to be a problem in 2023, with 93% expecting it to be a concern. This is a significant increase from the 66% of builders who considered it a problem in 2022.
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