Materials Remain Top Challenge for Builders, but New Issues Are Becoming Increasingly Problematic
The price and availability of building materials again topped the list of problems builders faced last year, but interest rates, general inflation and negative media moved considerably up the list.
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.
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 — which is not surprising, given the large number of unfilled job openings in the construction industry.
However, some problems became significantly more widespread in 2022. High interest rates were a problem for only 2% of builders in 2021 but affected 66% of builders in 2022. Rising inflation in the U.S. economy was a significant problem for 85% of builders in 2022, compared to 63% in 2021. And negative media reports making buyers cautious also affected 55% of builders in 2022, compared to 26% in 2021.
More builders (93%) expect high interest rates to be a problem in 2023, up strongly from the 66% who said it was a problem in 2022. Moreover, both the current and expected numbers were much higher in the recent survey than at any time between 2011 and 2021.
NAHB senior economist Ashok Chaluvadi provides more insights in this Eye on Housing post.