Strong consumer demand paired with a dearth of existing inventory left builders feeling confident as 2021 comes to a close, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
The index increased for the fourth consecutive month, by one point, to 84 in December, according to the latest HMI report released on Wednesday.
December’s HMI marks the highest point the metric has reached this year, tied with February 2021.
“The most pressing issue for the housing sector remains lack of inventory,” the NAHB release stated. “Building has increased but the industry faces constraints, namely cost/availability of materials, labor and lots.”
The association said single-family housing starts are anticipated to be 24 percent higher than levels in 2019 by year’s end, but higher interest rates to come in 2022 will pose affordability challenges for consumers.
The NAHB/Wells Fargo HMI gauges builder sentiment of current single-family home sales and expectations for the next six months. Any score over 50 indicates that more builders view conditions as good.
The current sales conditions HMI increased one point to 90 while the HMI that tracks traffic of prospective buyers increased by one point to 70. The HMI measuring sales expectations over the next six months stayed the same for the third month in a row at 84.
The Northeast posted the greatest gain in HMI scores, with the region’s HMI increasing by four points to 74. The South and West HMIs each rose by three points to 89 and 87, respectively. Meanwhile, the Midwest posted a two-point increase to 74.