Inflation not hurting homebuilder sentiment: NAHB CEO
National Association of Home Builders CEO Jerry Howard noted on Wednesday that rising inflation doesn’t seem to be hurting homebuilder sentiment, arguing that new houses can’t be built fast enough amid strong demand.
Howard provided the insight on “Varney & Co.” shortly after it was revealed that homebuilder sentiment held steady in December.
The National Association of Home Builders/Wells Fargo Housing Market Index this month rose one point to 84. The number ties the highest reading of the year that was posted in February.
The index can range between 0 and 100 with any print over 50 indicating positive sentiment. Any reading above 80 signals strong demand.
The National Association of Home Builders noted in a news release that despite concerns over inflation and ongoing production bottlenecks, home builder confidence edged higher for the fourth straight month due to strong consumer demand and limited existing inventory.
NAHB Chairman Chuck Fowke said, “Finding workers, predicting pricing, and dealing with material delays remains a challenge.”
He urged policymakers “to work on supply chain improvements and controlling costly inflation.”
NAHB chief economist Robert Dietz noted that “the most pressing issue for the housing sector remains lack of inventory.”
He acknowledged that “building has increased, but the industry faces constraints, namely cost/availability of materials, labor and lots.”
Dietz also noted that while 2021 single-family starts should end the year 24% higher compared to pre-COVID levels, higher interest rates in 2022 will likely put a damper on housing affordability.
On Wednesday, Howard told host Stuart Varney that the coronavirus pandemic has prompted more people to want to build new homes with more space, which is contributing to the soaring demand.
The Federal Reserve on Wednesday announced plans to accelerate the wind down of its aggressive bond-buying program, opening the door to interest rate liftoff in the first half of next year as policymakers seek to combat the hottest inflation in four decades.
The consumer price index rose 6.8% in November from a year ago, according to a new Labor Department report released Friday, marking the fastest increase since June 1982, when inflation hit 7.1%. The CPI – which measures a bevy of goods ranging from gasoline and health care to groceries and rents – jumped 0.8% in the one-month period from October.
The two-day policy setting meeting is the first since Chairman Jerome Powell conceded that inflation has been higher and longer-lasting than U.S. central bank officials initially anticipated.
Powell previously said policymakers wanted to conclude the bond-buying program before raising interest rates from near-zero, where they have sat since March 2020.
Howard stressed the demand for new homes “is fueled, in a large part, by coming out of the pandemic and people want, for the first time in years, what existing homes can’t give them.”
“They want more house,” he continued.
“For 30 years people were willing to accept smaller houses, and now they want an exercise room because if they are in lockdown again, they want to get some exercise. They want a home office. People want a porch or a patio, a deck, something where they can sit outside. All lessons learned from the pandemic.”