Builder Sentiment Declines in January on Inflation Concerns

On Tuesday (1-18-22), The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) reported that builder sentiment in the market for newly built single-family homes edged 1-point lower in January to a reading of 84. The HMI has hovered between 83 and 84 for the past three months, the same rate it was at in the spring of 2021. Builder confidence topped at a level of 90 in November 2020. Any reading above 50 indicates that more builders view conditions as good rather than poor and that demand remains strong.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell one point to 73, the Midwest increased one point to 75, and the South and West each posted a one-point rise to 88, respectively.

In remarks prepared for the January HMI, Robert Dietz, NAHB’s Chief Economist Robert Dietz said, “The HMI data was collected during the first two weeks of January and do not fully reflect the recent jump in mortgage interest rates. While lean existing home inventory and solid buyer demand are supporting the need for new construction, the combination of ongoing increases for building materials, worsening skilled labor shortages, and higher mortgage rates point to declines for housing affordability in 2022.”