Will ETFs Suffer As US Homebuilder Confidence Drops?

white and red wooden house miniature on brown table

The U.S. housing sector has impressed investors with encouraging performance amid the tough pandemic times. However, builder confidence for newly built single-family homes pulled back from record-high levels in December. Per the monthly National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder confidence for newly-built single-family homes came in at 86 in December in comparison to 90 points in November, 85 points in October, 83 points in September and 30 in April (the lowest since June 2012). However, the reading still stands as the second-highest in the history of the index. Any reading above 50 is considered positive and signals improving confidence.

Notably, all three components of the index dropped in December. The current sales conditions came in at 92 in December after declining four points. The metric measuring traffic of prospective buyers also witnessed a four-point drop to 73. Meanwhile, sales expectations for the next six months declined four points to 85, per the NAHB press release. The three-month moving averages for regional HMI scores in the Northeast declined a point to 82. Moreover, the South index climbed a point to 87. Also, the Western index jumped two points to 96, with the Midwest scaling up a point to 81, per the release.

NAHB Chairman, Chuck Fowke, reportedly commented “housing demand is strong entering 2021, however the coming year will see housing affordability challenges as inventory remains low and construction costs are rising. Policymakers should take note to avoid increasing regulatory costs associated with land development and residential construction,” per the press release.

Limited Inventory Hurdle Persists

The U.S. housing market has been consistently battling with the limited inventory conditions, largely due to land shortages, skilled labor deficiencies along with rising material costs. All these factors are affecting the affordability as prices for existing and new homes are soaring.

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