Potential buyers continue to flood into model homes across the country, and that has made builders feel better about their business than in more than 20 years. But rising timber prices could dampen the market’s momentum this fall.
Building confidence in the newly built, single-family home market jumped six points in August to 78 on the National Association of Home Builders / Wells Fargo Housing Market Index. Anything above 50 is considered positive sentiment.
The index is now at the highest level in the 35-year history of the monthly series and corresponds to the record set in December 1998. Builder sentiment dropped to 30 in April, when the coronavirus pandemic shut down the U.S. economy, but it came back restored Consumers were suddenly looking for more space in less urban areas.
“Demand for new households remains strong because low interest rates and a focus on the importance of housing are pushing the buyer’s traffic to highs as measured by the HMI,” said NAHB President Chuck Fowke. “However, the V-shaped recovery for housing has produced a sharp increase in timber prices, which have more than doubled since mid-April. Such cost increases could dampen this fall in the housing market, despite historically low interest rates.”
The cost of carpentry is rising not only because of increased demand, but because mills are closing in April and May and not expecting to see the kind of strong demand they are seeing now. There have also been problems with transport and labor.
Of the three components of the index, current sales conditions increased six points to 84. Sales expectations in the next six months increased three points to 78, and buyer traffic jumped eight points to 65, the highest level in the history of the index. survey.
Builders are clearly benefiting from the severe shortage of existing homes for sale. There were too few homes to meet the demand, even before the pandemic hit, and now fewer homeowners are ready to list their homes for sale.
Mortgage rates fell to a record low to be in early August, but shot higher last week as Treasury yields increased and mortgage giants Fannie Mae and Freddie Mac increased fees to lenders. Unless rates really break much higher, which is unlikely, the recent increase is unlikely to throw a lot of cold water on the very strong demand for housing.
“Housing has clearly been a bright spot during the pandemic and the sharp spike in builders’ confidence over the summer has led NAHB to update its forecast for single-family startups, which are now projected to only be a slight decline by 2020. display, “said NAHB chief economist Robert Dietz. “Single-family housing benefits from low interest rates and a noticeable suburban shift in demand for housing to suburbs, suburbs and rural markets, as tenants and buyers seek cheaper, lower-density markets.”
Regular builder sentiment rose in the Northeast Polder from three months 20 points to 65, in the Midwest it rose 13 points to 63. In the South sentiment increased 12 points to 71 and in the West it went 15 points to 78.
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