By Nathalie Voit
Builder sentiment in the market for single-family housing dropped to a six-month low of 79 in March 2022, according to data from the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released on March 16.
The preliminary reading for March showed a slight decline from February when the national HMI was downwardly revised to 81. March’s dismal figure is the lowest since August 2021, when the index fell to 75. In contrast, the HMI peaked at 84 in December.
According to The Single-Family Sales for the Next Six Months index, builders’ home sales expectations for the next six months sank 10 points to 70 from 80 in March. This was the lowest reading since June 2021, when the index slipped to 79.
The Present Single-Family Sales index, which tracks builders’ view of current market conditions for the sale of new homes, declined three points to 86. The index is down from a recent high of 90 in December.
The Traffic of Prospective Buyers index rose to a preliminary value of 67 from 65 last month. This was the only sub-index to have posted any gains in March.
According to NAHB, this is the fourth consecutive monthly decline in the HMI. Additionally, this is the first time the index has fallen below 80 since last September. Analysts tracking the housing market expected a forecast of 81 this month.
“Builders are more concerned that increasing construction costs and higher interest rates will price prospective home buyers out of the market. While low existing inventory and favorable demographics are supporting demand, the impact of elevated inflation and expected higher interest rates suggests caution for the second half of 2022,” NAHB Chief Economist Robert Dietz said in the release.
The news comes amid soaring costs for raw materials like lumber, which have caused the average price of a new single-family home to skyrocket by more than $18,600 over the past year, according to NAHB.
Overall, construction costs are up 20.4% year-over-year as builders struggle with supply-chain issues, sky-high lumber prices, and expensive tariffs on building materials.
“Historically high price levels for lumber and other building materials are dramatically affecting home prices and rental costs and threaten the nation’s economic stability,” NAHB Chairman Jerry Konter told the White House on March 14. “These supply chain price increases have only added to the ongoing housing affordability crisis.”