Rising Costs Put Pressure on Builders

So far, the month of April has brought about increasing costs for building materials. Home builders have already been facing a shortage of developed lots and skilled laborers, which  has caused builders' confidence to register lower that usual in the market for newly built, single-family homes. The Housing Market Index has suffered a two-point drop to 42.

This index measures the perceptions of builders regarding home sales and sales expectations for the next six months. They rate it as either "good," "fair," or "poor." Builders also rate the traffic of potential buyers as "high to very high," "average," or "low to very low." As long as the tallied scores for each of these categories are calculated anywhere above 50, more builders view conditions as good than poor.

"Many builders are expressing frustration over being unable to respond to the rising demand for new homes due to difficulties in obtaining construction credit, overly restrictive mortgage lending rules and construction costs that are increasing at a faster pace than appraised values," said Rick Judson, NAHB chairman and a home builder from Charlotte, N.C. "While sales conditions are generally improving, these challenges are holding back new building and job creation."

Currently, the score of 42 is not very promising, but there continues to be a high demand for new homes, as well as skilled laborers to build them. If the high cost of materials could go down soon, builders' confidence would likely rise. Perhaps May will be a better month!

Posted in: builder confidence,cost,high demand,housing market index,materials,national association of home builders,new homes