Builder sentiment returns to pre-coronavirus pandemic

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To find a V-shaped recovery from the economic wreckage of the coronavirus pandemic, consult home builders across the country.Homebuilders’ sentiment jumped 14 points to 72 in July, according to the National Association of Home Builders / Wells Fargo Housing Market Index (HMI). This is exactly what it was in March, before the pandemic hit the American economy. Anything over 50 is considered a positive feeling. The index dropped to 30 in April.

“Builders are seeing heavy traffic and a lot of interest in new construction because the inventory of existing homes remains meager,” said Chuck Fowke, president of NAHB, a builder in Tampa, Florida. “In addition, builders in the Northeast and Midwest are benefiting from a demand that was set aside during the spring closings. Low interest rates are also fueling demand and we expect housing will lead to an overall economic recovery. ”

Mortgage rates have hit new lows almost every week and are unlikely to rise anytime soon. This has given buyers more purchasing power, especially for newly built homes, which come at a high price. The demand for mortgages to buy a newly built home increased by more than 50% in June of each year.

Of the three components of the index, current sales conditions have jumped 16 points to 79, sales forecasts over the next six months have increased by 7 points to 75 and buyer traffic has increased by 15 points to 58 .

Manufacturers are clearly delighted with the recovery in demand, but they are also surprised and unprepared. Most manufacturers have closed or severely curtailed operations in March and April and are now struggling to get back on track. They had stopped buying land and laid off much of their labor. Material manufacturers did the same, which is why manufacturers are now facing soaring wood prices.

“Wood prices have been at an all time high for two years, and builders are reporting rising costs for other building materials while problems with availability of lots and skilled labor persist,” said Robert Dietz, Chief Economist of the NAHB. “Nevertheless, the important history of the changing geography of housing demand benefits new construction. Demand for new homes is improving in low-density markets, including small metropolitan areas, rural markets and large metro suburbs, as people seek larger homes and provide more flexibility. for telework in the coming years. The flight to the suburbs is real. ”

Regionally, builder sentiment in the Northeast increased by 22 points to 70 and jumped 18 points to 68 in the Midwest. In the South, it increased by 10 points to 73 and in the West, it jumped by 14 points to 80.

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