Despite continuing supply chain issues and labor shortages, builder confidence rose in September thanks to falling lumber prices and high demand, the National Association of Home Builders (NAHB)/ Wells Fargo Housing Market Index (HMI) reported. Builder sentiment in the market for newly-built single-family homes increased to 76, one point higher than last month.
The data broke a three-month streak of downward expectations. “Builder sentiment has been gradually cooling since the HMI hit an all-time high reading of 90 last November,” said NAHB Chairman Chuck Fowke. Fowke builds custom homes in Tampa, Fla.
“The September data show stability as some building material cost challenges ease, particularly for softwood lumber. However, delivery times remain extended and the chronic construction labor shortage is expected to persist as the overall labor market recovers.”
While the industry is slowly recovering, supply is still hindering the market, prompting Fannie Mae’s Economic and Strategic Research (ESR) Group to lower their initial 2021 real GDP growth projections from 6.3% to 5.4%. They are taking extra precautions as inflation plagues the country, lowering their Q4 new home sales expectations from 846,000 units to 789,000.
“Given the strength of recent house price appreciation and rent growth, we continue to believe that the contribution from housing to underlying inflation has yet to be fully realized within the official measures of inflation,” said Fannie Mae senior vice president and chief economist Doug Duncan.
“Further, affordability remains a challenge, even with mortgage rates near historic lows; if the pace of income growth doesn’t keep up with inflation and interest rates rise more than expected, we’d expect housing activity to slow from our current projections.”