Homebuilder confidence inched toward the highest reading of the year despite product shortages and a 39-year-high inflation rate that has prompted the Fed to halt aggressive pandemic-era stimulus programs.
“While demand remains strong, finding workers, predicting pricing, and dealing with material delays remains a challenge,” National Association of Home Builders (NAHB) Chairman Chuck Fowke said in a statement.
“Policymakers need to work on supply chain improvements and controlling costly inflation. Addressing lumber tariffs would be a good place to start.”
The populous Southern states registered the highest growth, with 19.1 percent, followed by the Northeast with 18.5 percent, the West with 15.6 percent, and the Midwest with 12.4 percent. Multifamily permits also showed strong gains throughout the country on a year-on-year basis.
The 10 metros that registered the highest number of single-family permits were Houston (44,342 permits), Dallas (43,012), Phoenix, Arizona (30,013), Atlanta (27,283), Austin, Texas (20,895), Tampa, Florida (16,613), Charlotte, North Carolina (16,310), Orlando, Florida (15,006), Jacksonville, Florida (13,809), and Nashville, Tennessee (13,766).
Present single-family housing sales, according to NAHB-HMI, were up by one point at 90 in December, while the number for the next six months showed no change since October, at 84. The “traffic of prospective buyers” also gained a point in December, at 70.
As for the seasonally adjusted regional distribution of the Housing Market Index, December saw a 10-point gain for the Northeast at 79, up for a third consecutive month. The Midwest and West saw a drop of one point at 74 and 87 respectively, while the South gained two at 89.
There was a monthly price increase for every category in products used for residential construction. Based on data from the latest Producer Price Index (PPI), November prices for building materials have gone up 14.1 percent year-to-date, more than triple the rate of 2020, when it was 3.9 percent.
The PPI for softwood lumber has gone up by 6.9 percent, with a gain of 16.1 percent since September. It’s predicted that the price will maintain its upward velocity in December. Prices for steel mill products increased 2.1 percent, a small jump from October.
The PPI for ready-mix concrete increased by 0.9 percent and 6.6 percent year-to-date, while gypsum products went down in price at 0.2 percent, but up by 18.8 percent year-to-date.
Paint prices have gone up significantly, with exterior coatings up by 16.7 percent and interior coatings by 10.9 percent. The price increases are also coupled with product shortages amid supply chain disruptions affecting the country.
“The most pressing issue for the housing sector remains lack of inventory,” said NAHB chief economist Robert Dietz. “Building has increased, but the industry faces constraints, namely cost/availability of materials, labor, and lots. And while 2021 single-family starts are expected to end the year 24 percent higher than the pre-COVID 2019 level, we expect higher interest rates in 2022 will put a damper on housing affordability.”
The Fed announced on Dec. 15 that bond purchases will be concluded earlier, in March rather than June 2022, increasing the monthly drawdown to $30 billion versus the $15 billion announced last month. This will lead to earlier interest rate hikes, which means a relative crunch in the ease of getting credit and higher loan rates.
