Homebuilder confidence is rising despite low inventory and labor shortages – what does this mean for consumers?
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Home builders are in a bullish frame of mind these days, even in the face of a host of industry challenges, with all signs pointing to continued price increases over the new year.
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Homebuilder sentiment in November climbed three points from the previous month to 83 on the National Association of Home Builders (NAHB) / Wells Fargo (HMI) Housing Market Index, which was released on Tuesday, November 16. This is the highest score since May and well above analysts’ predictions that the score would remain unchanged at 80. Scores above 50 are considered positive.
Builders across the United States have a positive view of the market, although those in the South and West are more confident than those in the Midwest and Northeast.
The bullish outlook is mainly due to low existing inventories and strong demand from buyers, the NAHB said in a press release. For now, those positives far outweigh a bunch of negatives that range from supply chain headaches and rising material costs to severe labor shortages and lots available.
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“The strong residential construction market continued in November despite continuing challenges on the supply side,” said NAHB President Chuck Fowke. “The lack of resale inventory combined with strong consumer demand continues to drive construction of single family homes. “
He added that the availability of lots is “at its lowest level for several decades and that the construction sector currently has more than 330,000 open positions. Policymakers need to focus on solving these problems to help builders produce more homes to meet strong market demand. “
Supply chain and inventory issues have forced some manufacturers to slow down despite strong buyer demand. DR Horton, the country’s largest builder, has had to slow sales to make sure it can deliver homes on time, CNBC reported.
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“We continued to intentionally restrict our pace of home sales by selling homes later in the build cycle to align with our production levels and better ensure the certainty of home closing dates for our buyers,” said President Donald Horton in the company’s latest earnings release.
All of this adds up to a good market for home sellers – and a challenge for buyers. The US housing market has already seen record price growth this year, according to Motley Fool, who cited data from the CoreLogic Home Price Index. Many industry experts expect prices to continue rising in 2022, although estimates vary wildly.
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Fannie Mae recently predicted house prices will rise 7.4% next year. Goldman Sachs sees an even larger gain of 16%, while CoreLogic estimates that prices will only rise by around 2%.
One thing that could tip the scales in favor of buyers is that many sellers seem motivated to unload their homes quickly. As GOBankingRates recently reported, about two-thirds of potential sellers plan to sell their homes within the next six months, according to a new survey from Realtor.com. This should bring more inventory to market quickly, which could lower prices in some parts of the country.
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