Construction Costs Dampen Builder Confidence

Home builders are a great gauge of housing market health. When they’re optimistic, chances are the economy is doing well and more new homes are being built. And when more new homes are being built, that helps balance supply and demand and keeps prices from rising too quickly. The National Association of Home Builders’ monthly Housing Market Index measures builder confidence and scores the results on a scale where any number above 50 indicates more builders view conditions as good than poor. In January, the index moved down a point to 83. The decline was the first in months but keeps the index relatively unchanged from where it was last spring. Chuck Fowke, NAHB’s chairman, says the drop is due to rising construction costs, which has made it harder for builders to keep up with buyer demand. “Higher material costs and lack of availability are adding weeks to typical single-family construction times,” Fowke said. “NAHB analysis indicates aggregate cost of residential construction materials has increased almost 19 percent since December 2021.” Despite those challenges, the index remains at a high level, with the gauge measuring current sales conditions holding steady at 90. (source)

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