Photo: Robert Clark

Rising labor and material costs have US homebuilders starting the new year feeling less confident about the housing market.

While builder confidence hit a record high in December, it slipped slightly in January — but still remains at an elevated level. That’s according to the results of a new monthly report released today by the National Association of Home Builders (NAHB).

The monthly survey is conducted by the NAHB and gauges homebuilder perceptions of the state of the single-family housing market. It’s comprised of three components: overall perception of the current and the future state of the market, as well as homebuyer traffic.

Scores for each component are used to calculate the Home Market Index (HMI), where any number over 50 is indicative of a more favorable view. All three survey components saw decreases in January.

Over the last month, builder optimism slid two points to a reading of 72 in January, following the 18-year high recorded in December.

“Builders confidence remained strong given changes to the tax code will promote the small business sector and boost broader economic growth,” says the NAHB in the digital release.

But, builders remain concerned about rising labor and material costs. In a separate survey of homebuilders, some 84 percent of respondents reported that labor was a “key challenge” for 2018, on par with the 84 percent of respondents that cited rising material costs.

Nonetheless, the HMI reading for “future sales expectations” remained at a reading of 78 in January, dropping 1 point from the previous month —  a sign that housing demand should continue to grow in 2018, according to NAHB.

“As the overall economy strengthens, owner-occupied household formation increases, and the supply of existing home inventory tightens, we can expect the single-family housing market to make further gains this year,” NAHB forecasts.

Meantime, the HMI component gauging current sales conditions fell 1 point from last month to 79 and the measure of buyer traffic dropped 4 points to a reading of 54.

Regionally, the three-month moving average HMI score rose 2 points in the West to a reading of 81, fell one point to 73 in the South, rose one point in the Midwest, and the Northeast gained four points to 59.

Click here to read the entire release.

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