According to the annual builders survey conducted by the National Association of Home Builders and Wells Fargo, high interest rates were again a significant factor for new home builders looking into 2024—though that number is down from 90% to 77% as rates have moderated and the Federal Reserve has ceased raising interest rates and is signaling a reduction in rates, possibly at a future meeting sometime this year.
The second most widespread problem in 2023 was economic inflation as 83% of new home builders cited it as a major issue, a number which has come down to 52% this year.
Other factors that played a part in the survey are:
- Cost/Availability of labor: 73% in 2023 to 71% in 2024
- Buyers expect prices or interest rates will decline if they wait: 71% to 77%
- Building Material Problems: 63% to 58%
- Cost/availability of developed lots: 57% to 64%
- Negative media reports making homebuyers cautious: 56% to 54%
- Impact/hook-up/inspection fees: 50% to 55%
- Difficulty obtaining zoning and permit approvals: 49% to 51%
- Concern about employment/economic situations:48% to 55%
- Local/state environmental regulations and policies: 48% to 52%
- Buyers expecting prices or interest rates will decline if they wait: 71% to 77%
- Gridlock/political instability in Washington making buyers cautious: 42% to 54%
- Buyers unable to sell existing homes: 26% to 25%
- Potential buyers putting off purchases due to student debt: 8% to 11%
- Competition from distressed sales/foreclosures: 5% to 11%
The cost and availability of labor was a significant problem to only 13% of builders in 2011. That share has increased significantly over the years, peaking at 87% in 2019. Fewer builders reported this problem in 2020 (65%), but the share rose again in 2021 (82%) and 2022 (85%). The share eased slightly in 2023 to 74%. A similar 75% expect the cost and availability of labor to remain a significant issue in 2024.
In 2011, building materials prices was a significant problem to 33% of builders. The share has fluctuated over the years, from a low of 42% in 2015 to a peak of 96% in 2020, 2021, and 2022. The slowdown in single-family construction in 2023 made this less of a problem for builders last year, as ‘only’ 63% reported it as a significant issue. Fewer expect it to face it in 2024 (58%).
For additional details, including a complete history for each reported and expected problem listed in the survey, please consult the full survey report. [1]