US homebuilders less optimistic due to high inflation and supply issues

Numbers: High inflation and continued shortages of essential supplies dampened optimism among homebuilders in the United States at the start of the new year. The National Association of Home Builders confidence index slipped 1 point to 83.

Key details: A measure of the traffic of homes for sale fell a few points in January, as did a survey of sales forecasts six months from now.

The biggest drop was in the northeast, where the omicron outbreak was the most severe and the weather was harsh.

Big Picture: Housing demand has been strong, but rising prices and rising mortgage rates could discourage potential buyers. The survey was conducted during the first half of January and did not fully include the recent rise in mortgage rates.

Even bigger obstacles are the ongoing shortages of labor and supplies as well as the higher costs of materials such as lumber. The NAHB said the cost of building materials jumped nearly 20% in the past year.

“Policymakers need to take action to fix supply chains,” said NAHB President Chuck Fowke, a custom home builder in Tampa, Florida.

Look forward: “While lean existing home inventory and strong buyer demand support the need for new construction, the combination of continued increases in building materials, worsening skilled labor shortages and rising mortgage rates indicate a decline in housing affordability in 2022,” said NAHB chief economist Robert. Dietz.

Market reaction: Stocks of homebuilders such as Lennar Corp. LEN,
-6.34%,
Toll Brothers Inc. TOL,
-4.65%
DR Horton Inc. DHI,
-5.19%
and PulteGroup Inc. PHM,
-4.50%
all fell sharply in Tuesday trading.

The S&P 500 SPX index,
-1.84%
and the Dow Jones Industrial Average DJIA,
-1.51%
also declined. Stocks have recently deflated on the prospect of an upcoming interest rate hike by the Federal Reserve.


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