NewsHomebuilder Sentiment Declines for the Fourth Month Straight

Homebuilder Sentiment Declines for the Fourth Month Straight

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According to the latest data from the Census, housing starts were 22.3% higher in February 2022 than a year prior. While the higher pace of new housing construction may seem like positive news considering America’s growing housing shortage, a new study found that homebuilder sentiment fell 2 points in April compared to March

According to the National Association of Homebuilders (NAHB) and Wells Fargo Housing Market Index, homebuilder confidence fell for the fourth month straight. Confidence among developers who build single-family homes fell to a seven-month low in April as the cost of constructing and purchasing a house continued to soar. 

The National Association of Homebuilders (NAHB) also wrote an open letter addressed to the White House, expressing concern over the housing market’s current state. In the letter, the NAHB pointed to rising interest rates, high construction and material costs, and unaffordable home prices and rents as the cause for alarm. The letter and housing market index data display the concern among many home builders. 

“Despite low existing inventory, builders report sales traffic and current sales conditions have declined to their lowest points since last summer as a sharp jump in mortgage rates and persistent supply chain disruptions continue to unsettle the housing market,” said NAHB Chairman Jerry Konter. 

NAHB Chief Economist Robert Dietz echoed those sentiments, remarking that the “housing market faces an inflection point” due to rising interest rates, home prices, and material costs. 

Interest rates on a 30-year fixed-rate mortgage hit 5.0% as of April 2022, compared to 3.0% a year prior. Homebuilders are less optimistic about the housing market because of high housing and building costs.

The construction cost of new housing is also a major concern. The construction producer price (PPI) index measures the year-over-year growth of prices paid for goods and services necessary for developing new homes. According to the PPI index, the cost of multifamily residential construction, not including capital investment, labor, and imports, was up 20.1% annually, while single-family construction was up 20.4%.

The rising cost of lumber is a major contributor to high housing prices, according to the NAHB letter. “Further exacerbating affordability woes is the unprecedented volatility in lumber prices that has raised the cost of a typical single-family home by more than $18,600 since last August”, the letter claims,” the letter states. 

To address the high cost of constructing housing, the letter requests that the White House “suspend tariffs on softwood lumber imports from Canada and to move quickly to enter into negotiations with Canada to pursue a new, long-term softwood lumber agreement.” 

“Few things would have a more immediate impact on lumber markets than a swift resolution to America’s ongoing trade dispute with Canada over softwood lumber,” NAHB claims in the letter. 

Tyler Williams
Tyler Williams
Tyler graduated from Virginia Commonwealth University in 2017 with a Bachelor's degree in Urban and Regional Studies. Currently based in Los Angeles, he works as a freelance content writer and copywriter for companies in real estate, property management, and similar industries. Tyler's main professional passion is writing about critical issues affecting big and small cities alike, including housing affordability, homelessness, inequality, and transportation. When he isn't working, he usually plans his next road trip or explores new neighborhoods and hiking trails.

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