Builder confidence remains strong but supply needs to grow

by Steve Randall17 Jan 2020

Builders remain confident in the market for newly-built single-family homes but supply issues are a worry.

The National Association of Home Builders / Wells Fargo Housing Market Index for January 2020 was down 1 point month-over-month to 75 – any number over 50 is positive – and along with December marks the two highest readings in more than 20 years.

“With the Federal Reserve on pause and attractive mortgage rates, the steady rise in single-family construction that began last spring will continue into 2020,” said NAHB Chief Economist Robert Dietz. “However, builders continue to grapple with a shortage of lots and labor while buyers are frustrated by a lack of inventory, particularly among starter homes.”

Sentiment increased in the Northeast, Midwest, and West, while the South was unchanged.

Looking at the main index’s three component indexes: traffic of prospective buyers increased one point to 58, the highest level since December 2017; current sales conditions fell three points to 81; and sales expectations in the next six months held steady at 79.

“Low interest rates and a healthy labor market combined with a need for additional inventory is setting the stage for further home building gains in 2020,” said NAHB Chairman Greg Ugalde

More market update: