Key Highlights
- Homebuilder confidence levels dropped in December from record highs after three consecutive months, according to the National Association of Homebuilders (NAHB
- Builders concerned that buyers beginning to feel sticker shock
- Each of three components of NAHB/Wells Fargo Housing Market Index dropped 4 points
Homebuilders nationwide have been doing handstands to express their confidence levels over the last three months. In December, barely a homebuilder picked up a jump rope, let alone did handstands.
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The National Association of Homebuilders/Wells Fargo Housing Market Index recorded record high homebuilder confidence levels in the single-family housing market for the last three months. Then, December rolled around and those confidence levels dipped a bit.
Now standing at a point count of 86, a drop from 90 the month before, this latest homebuilder confidence sentiment is still the second-highest reading since this Index was conceived in 1985. As a comparison, last December, the Index hit 76.
Each of the three components of the Index dipped a bit from last month’s reading. Take a look:
- Sales conditions – -4 points to 92
- Sales expectations – -4 points to 85
- Buyer traffic – -4 points to 73
Prices for both existing and new homes are skyrocketing due to low supply, low interest rates and seemingly insatiable demand. Those skyrocketing prices could have something to do with buyers experiencing sticker shock from such prices.
Looking ahead, Robert Dietz, chief economist with NAHB, worried that long standing, cost increasing issues that have plagued the new home building industry for years (limited supply, land, material and skilled labor) would likely continue into 2021. Dietz said, “As the economy improves with the deployment of a COVID-19 vaccine, interest rates will increase in 2021, further challenging housing affordability in the face of strong demand for single-family homes
Chairman of the NAHB Chuck Fowke was a bit more upbeat. “Housing demand is extremely strong entering 2021 however the coming year will see housing inventory challenges as inventory remains low and construction costs are rising.
Regionally, homebuilder confidence levels looked like this in December:
- Northeast – -1
- South – +1
- Midwest – +1
- West – +2
Mortgage applications for the week ending December 11, according to the Mortgage Bankers Association, however rose +1.1% after falling during the first two weeks of December (likely when the NAHB Index was calculated). Likely, this increase in mortgage applications was due to the 30-year mortgage rate dropping five points to 2.85%.
The purchase application index jumped +0.4% from the week before and the refinance application index increased +1% from the previous week. The refinance index is up +105% from last year.
Thanks to CNBC, the Mortgage Bankers Association and HousingWire.
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