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Builder Confidence Pulls Back from Record Levels

Wednesday, December 16, 2020

After setting successive survey highs in September, October, and November, the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) retreated a bit this month. The HMI, which is a measure of home builder confidence in the new home market, fell 4 points to 86. Despite this decline, it was still the second highest reading in the HMI's 35-year history. Only the November 2020 reading of 90 was higher.

NAHB economist Robert Dietz said, "Housing demand is strong entering 2021, however the coming year will see housing affordability challenges as inventory remains low and construction costs are rising.

"The issues that have limited housing supply in recent years, including land and material availability and a persistent skilled labor shortage, will continue to place upward pressure on construction costs. As the economy improves with the deployment of a COVID-19 vaccine, interest rates will increase in 2021, further challenging housing affordability in the face of strong demand for single-family homes."

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