Rising Costs Slow US Home Construction

The National Association of Home Builders reports that builder confidence dropped in March in all regions of the country and experts are blaming increased construction costs on the …

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The National Association of Home Builders reports that builder confidence dropped in March in all regions of the country and experts are blaming increased construction costs on the slip. Builders also believe demand is cooling due to rising prices and increased difficulty in securing loans, although residential construction firms remained optimistic about future build opportunities. The survey also showed that builders are facing roadblocks when trying to secure credit for building costs as the reestablishment of supply chains after the recession lead to higher prices in materials.   For more on this continue reading the following article from Property Wire.  

Confidence among  home builders in the United States fell unexpectedly this month due to the rising cost of materials and financing restrictions despite a rising demand for new properties.

The National Association of Home Builders/Wells Fargo index of builder confidence dropped to 42 from 44 in March, the lowest since October 2012 and the third monthly fall in a row. Readings below 50 mean more respondents said conditions were poor.

‘Many builders are expressing frustration over being unable to respond to the rising demand for new homes due to difficulties in obtaining construction credit, overly restrictive mortgage lending rules and construction costs that are increasing at a faster pace than appraised values,’ said Rick Judson, the group’s chairman.

The confidence survey asks builders to characterize current sales as good, fair or poor and to gauge prospective buyers’ traffic. It also asks participants to gauge the outlook for the next six months.

The report showed builders grew more concerned about current sales and buyer traffic, indicating demand has cooled along with the rest of the economy. Nonetheless, residential construction firms were the most optimistic about future sales than at any time in six years, and the association believes that this is a sign the industry will keep contributing to the expansion.

All regions showed a decline in confidence.  The Northeast was unchanged at 38 in April while the Midwest registered a two point decline to 45, the South registered a four point decline to 42 and the West posted a three point decline to 55.

‘Supply chains for building materials, developed lots and skilled workers will take some time to re-establish themselves following the recession, and in the meantime builders are feeling squeezed by higher costs and limited availability issues,’ said NAHB chief economist David Crowe.

‘That said, builders’ outlook for the next six months has improved due to the low inventory of for sale homes, rock bottom mortgage rates and rising consumer confidence,’ he added.

‘Although the pace of the housing market recovery is gaining momentum, it is important to keep in mind that we are still in the early stages of the recovery, and there’s a long way to go before the industry reaches normalized activity levels,’ said Jeffrey Mezger, chief executive officer of KB Home.

This article was republished with permission from Property Wire.

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