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Homebuilders are targeting the exurbs and inner suburbs

Lumber prices ease and housing demand remains strong

Confidence among homebuilders steadied over the past month despite continuing material and labor challenges, according to the latest National Association of Home Builders (NAHB) and Wells Fargo Housing Market Index (HMI) report.

The report is based on a monthly survey of NAHB members, in which respondents are asked to rate market conditions for the sale of new homes at the present time and in the next six months as well as the traffic of prospective buyers of new homes. Scores for each component of the survey are then used to calculate an index where any number over 50 indicates that more homebuilders view conditions as good than poor.

After a three-month decline, homebuilder sentiment for in the market for newly built single-family homes increased one point to 76 in September. This is two points higher than it was forecasted to be, but still seven points below where it was at the start of the year.

The NAHB believes that this apparent steadying is due to the easing of material prices, especially softwood lumber. The job openings rate in construction is also trending higher.

In November 2020 the index hit an all-time high of 90, but it has been steadily declining ever since.

“The single-family building market has moved off the unsustainably hot pace of construction of last fall and has reached a still hot but more stable level of activity, as reflected in the September HMI,” NAHB Chief Economist Robert Dietz said in a statement. “Exurban markets have expanded the most over the last year, although inner suburbs are now experiencing an acceleration, with townhouse construction having had the best quarter in 14 years this spring.”

Housing affordability will be an important demand-side fact in the coming months due to rapidly rising home prices and construction costs, according to the NAHB.

Looking at regional HMI scores, the three-month moving average for the Northeast fell two points to 72, the South and the West also dropped to 80 and 83, respectively, and the Midwest held steady at 68.  

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