Builder Confidence Begins to Weaken as Material and Land Prices Increase

Home builder confidence reached its highest level ever last year, but rising costs are threatening that. According to the National Association of Home Builders and Wells Fargo Housing Market Index, builder confidence for the single-family home market dropped three points this month to 83. In November, that number reached a record high of 90. Still, builder confidence exceeds 2019 numbers, thanks to high buyer demand. NAHB Chairman Chuck Fowke told CNBC that builders are becoming unhappy with the lack of affordable lots, delayed delivery times, and supply constraints. Other index metrics, such as sales conditions and expectations, fell as well.

Of the index’s three components, current sales conditions dropped 2 points to 90. Sales expectations in the next six months fell 2 points to 83 and buyer traffic fell 5 points to 68.

“While housing continues to help lead the economy forward, limited inventory is constraining more robust growth,” said NAHB chief economist Robert Dietz. “A shortage of buildable lots is making it difficult to meet strong demand and rising material prices are far outpacing increases in home prices, which in turn is harming housing affordability.”

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