U.S. homebuilder confidence in the market for single family homes unexpectedly fell in January, pulled down by surging COVID-19 infections and more expensive lumber, though the housing market remains underpinned by record low mortgage rates.
The NAHB/Wells Fargo Housing Market index slipped to a reading of 83 this month from 86. Economists polled by Reuters had expected the index would be unchanged at 86. A reading above 50 means more builders view market conditions as favorable than poor. The index hit an all-time high of 90 in November.
“Despite robust housing demand and low mortgage rates, buyers are facing a dearth of new homes on the market, which is exacerbating affordability problems,” said NAHB chairman Chuck Fowke. “Builders are grappling with supply-side constraints related to lumber and other material costs, a lack of affordable lots and labor shortages that delay delivery times and put upward pressure on home prices.”
Demand for housing is being driven by cheaper mortgages and an exodus from city centers to suburbs and other low density areas as companies allow employees to work from home and schools shift to online classes because of the coronavirus pandemic. About 23.7% of the labor force is working from home.
The coronavirus recession, which started in February, has disproportionately affected lower-wage earners. A resurgence in COVID-19 cases is also disrupting labor at construction sites. The 30-year fixed mortgage rate is around an average of 2.79%, according to data from mortgage finance agency Freddie Mac.
The survey’s measure of sales expectations in the next six months fell two points to a reading of 83 this month, while a gauge of current sales conditions decreased two points to 90. The prospective buyers index dropped five points to 68.