Increased demand for new homes is exceeding supplies of ready-to-build land, building materials and workers
Confidence among U.S. homebuilders fell this month because of concerns that increased demand for new homes is exceeding supplies of ready-to-build land, building materials and workers.
In the short term, those constraints could slow sales. But builders’ outlook for sales over the next six months has reached its strongest point in more than six years.
The National Association of Home Builders/Wells Fargo builder sentiment index released Monday fell to 44 from 46 in February. It was the second decline since January, which was preceded by eight straight monthly gains. A measure of current sales conditions declined from February’s reading.
Readings below 50 suggest negative sentiment about the housing market. The last time the index was at 50 or higher was in April 2006.
The index began trending higher in October 2011, when it was 17. That increase coincided with the start of a housing recovery.
An improving job market, persistently low mortgage rates and rising home values have helped fuel U.S. homes over the past year. New-home sales jumped 16 percent in January to the highest level since July 2008.
The combination of heightened demand and a tight supply of previously occupied homes for sale have motivated builders to ramp up construction. Builders started work on the most homes last year since 2008.
Despite the positive sales trends, many builders are facing higher costs for building materials and competition for land cleared for development. Some also are having trouble obtaining financing to buy land and cover construction costs.
At privately held Sivage Homes, which builds in New Mexico and Texas, customer traffic is up this spring and points to a better sales season than last year. But the builder’s difficulty obtaining loans to acquire and develop land means the sales gains will likely be only marginally better than a year ago, says CEO Michael Sivage.
“That’s not a demand issue but a supply issue,” he says.
Banks were badly burned when land values crashed after the housing boom. Many have been slow to provide financing to smaller builders, many of which are short on land.
Adding to the problem: As demand for land has grown, so have sales prices, which now often exceed the appraised value of the land. In that scenario, lenders are less likely to make a loan unless builders put up a lot more of their own money.
Meanwhile, builders large and small have reported a shortage of workers in markets where residential construction has picked up sharply, such as Texas and Arizona.
Many construction workers — from roofers and drywall installers, to framers and carpenters — appear to have fled to other fields, such as the booming oil and natural gas industry.
While U.S. residential construction jobs increased 3.1 percent in February from a year earlier, they remain about 40 percent below the peak reached during the housing boom.
“The road to a housing recovery will be a bumpy one until these issues are addressed, but in the meantime, builders are much more optimistic today than they were at this time last year,” said David Crowe, the NAHB’s chief economist.
The latest builder confidence index, based on responses from 341 builders, comes as the critical spring home-selling season is under way.
A gauge of current sales conditions fell four points to 47, but a measure of traffic by prospective buyers improved three points to 35, while builders’ outlook for sales in the next six months improved one point to 51, the highest level since June 2006.
Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to NAHB statistics.
More Related Stories
- Greek yogurt, toxic waste hazard?
- Incoming BBC news director on journalism gender gap: "We can do better"
- Illegal construction, shoddy materials at fault in Bangladesh factory disaster
- Destroying the planet for record profits
- Lawsuit alleges anti-gay hiring practices at ExxonMobil
- The Maker kids are alright
- Portland's senseless war on fluoride
- Is Pittsburgh the next Portland?
- "Original Coca-Cola had a very small amount of cocaine"
- Justin Bieber will destroy you if you live-tweet his parties
- Corporations accused of wrongdoing win battle to keep identities secret
- Wall Street firm's "Golden Pitchbook" is totally sexist, full of lies
- Apple's biggest sin: Popularity
- Facebook's hate speech problem
- Amazon set to launch fine-art gallery
- Rand Paul: Congress should apologize to Apple, not the other way around
- Hundreds of low-wage federally contracted workers strike in D.C.
- When America became a third-world country
- Wikipedia cleans up its mess
- Should wunderkinds be allowed to drop out of high school?
- Former IRS commissioner to testify on Capitol Hill
Featured Slide Shows
The week in 10 picsclose X
- 1 of 11
Lisa Montgomery embraces her nephew Thursday after a tornado tore apart her home in Cleburne, Texas. The twister killed six people and destroyed entire swaths of the North Texas town.
Credit: AP/LM Otero
Jack McMahon, the defense attorney for abortion doctor Kermit Gosnell, speaks outside the Criminal Justice Center in Philadelphia Tuesday. His client was convicted of killing three babies in his clinic, and will serve multiple life sentences.
Credit: AP/Matt Rourke
A photo taken Monday captures Vice President Joe Biden's response to a Milwaukee second-grader's innovative proposal to end America's epidemic of gun violence. This guy!
Credit: AP/Jenny Aicher
Sen. Rand Paul, R-Ky., flanked by a grouper-eyed Michele Bachmann, addresses the IRS' admission that it targeted Tea Party groups in advance of the 2012 election. In an op-ed for CNN Thursday, the Kentucky senator slammed the president for his faux outrage.
Credit: AP/Molly Riley
Ousted IRS chief Steven Miller is sworn in on Capitol Hill Friday. Miller testified before the House Ways and Means Committee on the extra scrutiny the agency gave conservative groups applying for tax-exempt status.
Credit: AP/J. Scott Applewhite
Attorney General Eric Holder pauses as he testifies on Capitol Hill before the House Judiciary Committee Wednesday. Holder is under fire, among other things, for the Justice Department's gathering of phone records at the Associated Press.
Credit: AP/Carolyn Kaster
O.J. Simpson sits during an evidentiary hearing at Clark County District Court in Las Vegas, Nev., Thursday. Simpson, who is currently serving a nine-to-33-year sentence in state prison for armed robbery and kidnapping, is using a writ of habeas corpus to seek a new trial.
Credit: AP/Las Vegas Review-Journal/Jeff Scheid
Major Tom to ground control: On Sunday astronaut Chris Hadfield recorded the first music video from space, a cover of David Bowie's "Space Oddity."
Credit: AP/NASA/Chris Hadfield
When it rains it pours. President Barack Obama speaks during a news conference Thursday with Turkish Prime Minister Recep Tayyip Erdogan, inexplicably inspiring an #umbrellagate Twitter meme.
Credit: AP/Jacquelyn Martin
A smoke plume rises high above a road block at the intersection of County A and Ross Road east of Solon Springs, Wis., Tuesday. No injuries were reported, but the the wildfire caused evacuations across northwestern Wisconsin.
Credit: AP/The Duluth News-Tribune/Clint Austin
Recent Slide Shows
- 1 of 11