Builder Confidence Ticks Up, Building Materials Price Growth Slows
A modest drop in interest rates helped to end a string of 12 straight monthly declines in builder confidence levels, although sentiment remains in bearish territory as builders continue to grapple with elevated construction costs, building material supply chain disruptions and challenging affordability conditions, according to a recent report from the National Association of Home Builders.
Builder confidence in the market for newly built single-family homes in January rose four points to 35, according to the NAHB/Wells Fargo Housing Market Index (HMI).
“While NAHB is forecasting a decline for single-family starts this year compared to 2022, it appears a turning point for housing lies ahead,” said NAHB Chief Economist Robert Dietz. “In the coming quarters, single-family home building will rise off of cycle lows as mortgage rates are expected to trend lower and boost housing affordability. Improved housing affordability will increase housing demand, as the nation grapples with a structural housing deficit of 1.5 million units.”
In a separate release, NAHB also reports that building materials price growth slowed 60% in 2022. At its peak growth rate following the pandemic, building material prices were increasing at a 24% annualized rate. That pace has slowed significantly due to Fed tightening and reduction in demand stemming from higher mortgage rates. Nonetheless, many builders continue to experience supply chain disruptions for electrical transformers, concrete, appliances, doors, windows, and other building materials.