Homebuilders growing very concerned about affordability

Still, builder confidence increased for second month in a row

Homebuilder confidence continued to rise in October despite increasing affordability issues due to rising material prices and ongoing shortages, according to the latest National Association of Home Builders (NAHB) and Wells Fargo Housing Market Index (HMI) report released on Monday.

The report is based on a monthly survey of NAHB members, in which respondents are asked to rate market conditions for the sale of new homes at the present time and in the next six months as well as the traffic of prospective buyers of new homes. Scores for each component of the survey are then used to calculate an index where any number over 50 indicates that more homebuilders view conditions as good than poor.

Sentiment among homebuilders for newly build single-family homes rose four points in October to 80, the index’s highest reading since July 2021. Confidence among homebuilders began to steady in September, as the index rose one point after a three-month decline. While this October reading is positive, it is still 10 points lower than the index’s all-time high set in November 2020.

NAHB attributes this increase to strong consumer demand for homes. As housing inventory remains low and buyers are continuing to face strong competition with one-third of homes going under contract within a week, many are becoming discouraged and have started looking for alternative options.

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