KB Home is currently building single-family residential homes in Valley Center, California. This photo was taken June 3, 2021.
Homebuilders across the nation are not seeing relief from supply chain problems that have slowed construction in recent years, but high buyer demand seems to be compensating.
The National Association of Home Builders/Wells Fargo Housing Market Index showed that builders' confidence in single-family home construction rose to 80 points in October. This is still below the 85 in October 2020, and the record-breaking 90 in November last year. Positives are defined as anything above 50
"Although home sales and demand remain strong, builders continue with supply chain disruptions, labor shortages, that are delaying completion time and putting upward pressure building material and home prices," stated Chuck Fowke (a Tampa-based homebuilder), in a release.
Current sales conditions rose 5 percentage points to 87, out of the three components of the index. Sales expectations for the next six-months increased by 3 points to 84, and buyer traffic rose 4 points to 65.
Builders are now most concerned about affordability. They raise prices to cover rising labor, materials, and land costs.
According to the U.S. Census, August's median home price was 20% more than August 2020. This is partly due to the higher number of homes on the high end of this market, but also because of builder increases.
Builders have had to slow down home sales because of construction obstacles. They are worried about not being able to deliver homes at a normal rate.
As the supply of homes for sale is still extremely limited and expensive, homebuyers are increasingly turning to new construction.
Robert Dietz (chief economist at the NAHB), stated that "building material price increases and bottlenecks continue" and that interest rates will rise as the Fed starts to reduce its purchases of U.S. Treasuries.
The Mortgage Bankers Association just released a forecast that predicts that the average 30-year fixed mortgage rate will reach 4% by 2022. This is up from 3% currently.
The three-month moving averages builder mood in the Midwest rose by 1 point to 69. It was 72 in the Northeast. The South and West were also unaffected at 80 and respectively 83.
