Home Builders Continue to Face Supply Chain Issues

According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index for January 2023, the price and availability of building materials again topped the list of problems builders faced over the past 12 months, but interest rates, general inflation and negative media moved considerably up the list.

For more than 30 years, the NAHB has conducted a monthly survey of single-family builder members in order to generate the NAHB/Wells Fargo Housing Market Index (HMI). The HMI survey asks builders to rate market conditions for the sale of new homes at the present time and expected over the next six months, as well as the traffic of prospective buyers. The results are combined into a single composite index that measures the overall strength of the market for new single-family housing.

According to responses on the January 2023 survey for the NAHB/Wells Fargo Housing Market Index (HMI), building material prices were the most significant issue for builders in 2022 (cited by 96% of builders), followed by availability and timing to obtain building materials (cited by 86% of builders). Both problems topped the list in 2021 as well.

According to Trading Economics, lumber is expected to trade at $362.46/1000-board feet by the end of Q1 2023.

The cost and availability of labor has also been a relatively widespread problem, reported as a significant issue by 82% of builders in 2021, and 85% in 2022.

According to the Bureau of Labor Statistics (BLS), residential construction employment stood at 3.2 million nationwide in November 2022, comprised of 903,000 builders and 2.3 million residential specialty trade contractors. The six-month moving average of job gains for residential construction was 4,617 a month. Over the last 12 months, home builders and remodelers added 105,000 jobs on a net basis, and since the low point following the Great Recession, residential construction has gained approximately 1,204,500 positions.

Builders cited some more widespread issues in 2022, with high interest rates a problem for just 2% of builders in 2021, but jumped to 66% of builders in 2022. The spike in inflation was another significant problem for 85% of builders in 2022, compared to just 63% who cited the same issue in 2021. Negative media reports making potential buyers cautious also impacted 55% of builders in 2022, compared to just 26% of builders in 2021.

Those polled by NAHB expected high interest rates to be a problem in 2023 (93%), up from the 66% share who said it was a problem in 2022.