Sentiment among America’s homebuilders fell more than forecast in September as companies grew concerned about the cost of construction materials and labor shortages in the wake of Hurricanes Harvey and Irma, according to data Monday from the National Association of Home Builders/Wells Fargo.
The Housing Market Index fell to 64 (the estimate 67) from a revised 67 in August Measure of six-month sales outlook dropped 4 points, the most since November 2015, to 73. The current sales index declined to 70 from 74, the biggest retreat in nearly three years.
The pullback in sentiment reflects builders’ heightened concerns about higher prices for materials following Harvey’s widespread damage to properties in southeast Texas and Irma’s landfall in Florida. In addition to rising costs of construction supplies, the industry has also been contending with a shortage of workers and ready-to-build lots.
Nonetheless, a solid job market and still-low mortgage rates indicate the residential real estate market will continue to improve, the builders group said. Housing is also likely to get a boost later this year and in early 2018 as rebuilding efforts begin in areas affected by the Atlantic hurricanes.
“The recent hurricanes have intensified our members’ concerns about the availability of labor and the cost of building materials,” NAHB Chairman Granger MacDonald, a homebuilder and developer from Kerrville, Texas, said in a statement. “Once the rebuilding process is underway, I expect builder confidence will return to the high levels we saw this spring.”
“Despite this month’s drop, builder confidence is still on very firm ground,” Robert Dietz, chief economist at NAHB, said in the statement. “With ongoing job creation, economic growth and rising consumer confidence, we should see the housing market continue to recover at a gradual, steady pace throughout the rest of the year.”
Readings greater than 50 indicate more respondents reported good market conditions. The gauge of prospective buyer traffic eased to 47 from 48, the fifth decline in the past six months. The index of confidence in the South declined to 65 from 69. The measure of sentiment among builders in the Midwest dropped to 59, the lowest level since November, from 65; confidence was higher in the West and Northeast.