Strong consumer demand outweighed supply chain disruptions and labor shortages in the home builder confidence, according to the October edition of the Housing Market Index (HMI) published by the National Association of Homebuilders (NAHB) and Wells Fargo (NYSE:WFC).
What Happened: The October HMI moved four points higher from the previous month to a reading of 80. The HMI peaked at 90 in November 2020 and was at 85 in October 2020.
All three major HMI indices posted gains in October: the index following current sales conditions rose five points to 87, the component measuring sales expectations in the next six months saw a three-point uptick to 84 and the gauge charting traffic of prospective buyers rose four points to 65.
While home builders maintained their optimism, the NAHB leadership warned that the issues facing their industry have not abated.
“Although demand and home sales remain strong, builders continue to grapple with ongoing supply chain disruptions and labor shortages that are delaying completion times and putting upward pressure on building material and home prices,” said NAHB Chairman Chuck Fowke, a custom home builder from Tampa, Florida.
“Builders are getting increasingly concerned about affordability hurdles ahead for most buyers,” said NAHB Chief Economist Robert Dietz. “Building material price increases and bottlenecks persist and interest rates are expected to rise in coming months as the Fed begins to taper its purchase of U.S. Treasuries and mortgage-backed debt. Policymakers must focus on fixing the broken supply chain. This will spur more construction and help ease upward pressure on home prices.”
What Else Happened: Inventory challenges were evident in the latest national housing market report published by RE/MAX LLC (NASDAQ:RMAX).
Housing inventory declined August-to-September by 2.3% and was down by 23.6% from one year earlier. During the first nine months of 2021, inventory has declined month-over-month in all but June and July.
RE/MAX also noted September home sales dropped by 7% from August and was down 4.2% from September 2020. September’s median sales price of $329,000 was a 1.1% drop from August but was up 12.5% year-over-year and was also the fourth highest in RE/MAX report’s history; home prices have increased year-over-year for 33 consecutive months.
"This was the second-most active September for sales in 14 years, trailing only 2020, which was an outlier in many ways," said Nick Bailey, president of RE/MAX, LLC. "Plus, the expected seasonal drop in sales from August to September was half of what it usually is, indicating that buyers and sellers are still very much on the move.
"Homebuilders are trying to fill the gap – especially with multi-family home construction – but many of them are held up by shortages in labor and materials. That said, the market's still active – just not quite at the pace we saw earlier this year."
Photo: Michal Jarmoluk from Pixabay.