The Real Estate Bloggers

Rising Costs and Tight Credit Slow New Construction

Posted: 18 Mar 2013 09:29 AM PDT

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The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) showed a slight dip for January, 2013. The results issued today showed the HMI index slipped 4 points from 51 (optimistic territory) to 47 (negative territory) as increased costs for raw materials and land started hitting the bottom line and the old nemesis, tight credit lending standards, started affecting approvals for new construction.

From NAHB Chairman Rick Judson:

“Following eight consecutive months of improvement, builder confidence leveled off in January and has since edged down several points,” noted NAHB Chairman Rick Judson, a home builder from Charlotte, N.C. “Although many of our members are reporting increased demand for new homes in their markets, their enthusiasm is being tempered by frustrating bottlenecks in the supply chain for developed lots along with rising costs for building materials and labor. At the same time, problems with appraisals and credit availability remain considerable obstacles to completing deals.”

“In addition to tight credit and below-price appraisals, home building is beginning to suffer growth pains as the infrastructure that supports it tries to re-establish itself,” explained NAHB Chief Economist David Crowe. “During the Great Recession, the industry lost home building firms, building material production capacity, workers who retreated to other sectors and the pipeline of developed lots. The road to a housing recovery will be a bumpy one until these issues are addressed, but in the meantime, builders are much more optimistic today than they were at this time last year.” via Press Release

The regional 3 month rolling average for the HMI score also had some interesting regional variances.

The West saw a surge in confidence with thier score rising 4 points to 57.
The Northeast region stayed negative at 37 not moving,
And in the South and Midwest, their was slight improvement of the negative sentiment coming in up 1 point with a 47 score.

To see the raw HMI data, follow this link www.nahb.org/hmi.