Homebuilder Sentiment Increases in April

04/16/2021

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April showers may bring brighter days for homebuilders. The National Association of Home Builders Housing Market Index increased to 83, seasonally adjusted, compared to March’s reading of 82. The index tracks homebuilder confidence in current and future single-family home sales and traffic of potential homebuyers on a monthly basis.

Homebuilders’ outlook on both activity from prospective buyers and single-family sales ticked up this month compared to March, but sentiment around sales in six months’ time dropped two points to a reading of 81 from 83.

Robert Dietz, NAHB’s chief economist, attributed those headwinds to building costs. “The supply chain for residential construction is tight, particularly regarding the cost and availability of lumber, appliances and other building materials,” he said in a statement.

Regional sentiment was divided. The Northeast and Midwest indices saw month-over-month declines, while the South and West regional indices saw gains. All indices were up tremendously compared to this time last year, when the pandemic was first raging and many regions went into lockdown.

The NABH national index’s reading in April 2020 was 30. It jumped in July 2020 as demand from homebuyers picked up and prices surpassed $300,000 for the first time in history. While many say historically low inventory will ensure demand doesn’t dwindle, interest rates have been creeping up and prices continue to climb, eating into affordability. In February, pending home sales — typically seen as an indicator of future home sales — fell 11 percent month-over-month.

Despite those challenges, the industry is feeling positive.

“There are certainly some headwinds that are hitting us, namely lack of lot inventory and cost. But I think there’s still significant tailwinds,” said Chris Bley, co-president and chief investment officer at residential investment firm IHP Capital Partners. “Covid certainly kicked the homebuying frenzy into overdrive.”


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