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Jan. 18, 2022, 10:38 a.m. EST

U.S. home builders less optimistic due to high inflation and supply woes

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By Jeffry Bartash

The numbers: High inflation and persistent shortages of key supplies dimmed the optimism of U.S. home builders early in the new year. The National Association of Home Builders’ confidence index  slipped 1 point to 83.

Key details: A measure of customer traffic at homes for sale fell a few points in January, as did a survey of sales expectations six months from now.

The biggest drop took place in the Northeast, where the omicron outbreak has been the most severe and the weather has been harsh.

Big picture: Demand for housing has been strong, but rising prices and higher mortgage rates could turn off potential buyers. The survey was taken during the first half of January and did not fully include the recent jump in mortgage rates.

Even bigger obstacles are ongoing shortages of labor and supplies as well as higher costs for materials such as lumber. The NAHB said the cost of building materials has surged almost 20% in the past year.

“Policymakers need to take action to fix supply chains,” said NAHB Chairman Chuck Fowke, a custom home builder in Tampa, Fla.

Looking ahead: “While lean existing home inventory and solid buyer demand are supporting the need for new construction, the combination of ongoing increases for building materials, worsening skilled labor shortages and higher mortgage rates point to declines for housing affordability in 2022,” said NAHB chief economist Robert Dietz.

Market reaction:  Home-builder stocks such as Lennar Corp. /zigman2/quotes/202536373/composite LEN +4.07% , Toll Brothers Inc. /zigman2/quotes/201912487/composite TOL +4.55% D.R. Horton Inc. /zigman2/quotes/202032328/composite DHI +5.29%  and PulteGroup Inc. /zigman2/quotes/201694804/composite PHM +4.44%  all fell sharply in Tuesday trades.

The S&P 500 Index  /zigman2/quotes/210599714/realtime SPX +2.17% and the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.79%  also declined. Equities have deflated lately owing to the prospect of the Federal Reserve raising interest rates soon.

/zigman2/quotes/202536373/composite
US : U.S.: NYSE
$ 78.81
+3.08 +4.07%
Volume: 1.14M
May 26, 2022 12:55p
P/E Ratio
6.16
Dividend Yield
1.91%
Market Cap
$21.93 billion
Rev. per Employee
$2.64M
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/zigman2/quotes/201912487/composite
US : U.S.: NYSE
$ 50.28
+2.19 +4.55%
Volume: 1.15M
May 26, 2022 12:55p
P/E Ratio
6.28
Dividend Yield
1.60%
Market Cap
$5.64 billion
Rev. per Employee
$1.84M
loading...
/zigman2/quotes/202032328/composite
US : U.S.: NYSE
$ 72.65
+3.65 +5.29%
Volume: 2.92M
May 26, 2022 12:55p
P/E Ratio
5.19
Dividend Yield
1.24%
Market Cap
$24.29 billion
Rev. per Employee
$2.58M
loading...
/zigman2/quotes/201694804/composite
US : U.S.: NYSE
$ 44.88
+1.91 +4.44%
Volume: 853,649
May 26, 2022 12:55p
P/E Ratio
5.49
Dividend Yield
1.34%
Market Cap
$10.21 billion
Rev. per Employee
$2.33M
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
4,065.21
+86.48 +2.17%
Volume: 1.14B
May 26, 2022 12:55p
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/zigman2/quotes/210598065/realtime
US : Dow Jones Global
32,693.67
+573.39 +1.79%
Volume: 164.62M
May 26, 2022 12:55p
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