HOUSTON (ICIS)–An index measuring builder
confidence in the housing industry declined for
the 12th consecutive month in December, the
National Association of Home Builders (NAHB)
said on Monday.
The National Association of Home Builders
(NAHB)/Wells Fargo Housing Market Index (HMI)
fell to 31, its lowest level since mid-2012,
with the exception of the onset of the pandemic
in spring 2020.
The following chart shows the HMI.
Source: NAHB
The following chart shows the present outlook.
Source: NAHB
The following chart shows the outlook for the
next six months.
Source: NAHB
The following chart measures the traffic of
potential buyers of homes.
Source: NAHB
Builder confidence has been falling because of
higher construction costs, house appreciation
and rising mortgage rates, all of which have
made new homes unaffordable for an increasing
number of consumers.
The average rate for a 30-year mortgage reached
6.31% last week, according to Freddie Mac, a
company that purchases and securitises home
loans.
The rate is down from its recent high of 7.08%.
However, it is still up sharply from its
52-week low of 3.05%.
“In this high inflation, high mortgage rate
environment, builders are struggling to keep
housing affordable for home buyers,” said NAHB
Chairman Jerry Konter, a home builder and
developer from the US state of Georgia.
“Our latest survey shows 62% of builders are
using incentives to bolster sales, including
providing mortgage rate buy-downs, paying
points for buyers and offering price
reductions,” Konter said.
“But with construction costs up more than 30%
since inflation began to take off at the
beginning of the year, there is little room for
builders to cut prices,” he said. “Only 35% of
builders reduced homes prices in December,
edging down from 36% in November. The average
price reduction was 8%, up from 5% or 6%
earlier in the year.”
“Because of the uncertain economic outlook,
builders still need to plan out at least a year
when they think about timelines for land and
construction,” said Robert Dietz, chief
economist for the NAHB. A scarcity of land
ready to develop is another factor raising
housing costs.
“NAHB is expecting weaker housing conditions to
persist in 2023, and we forecast a recovery
coming in 2024, given the existing nationwide
housing deficit of 1.5m units and future, lower
mortgage rates anticipated with the Fed easing
monetary policy in 2024,” he said.
The housing market is a key consumer of
chemicals, driving demand for a wide variety of
chemicals, resins and derivative products, such
as plastic pipe, insulation, paints and
coatings, adhesives and synthetic fibres, among
many others.
The white pigment titanium dioxide (TiO2) is
used in paints.
Solvents used in paints and coatings include
butyl acetate (butac), butyl acrylate
(butyl-A), ethyl acetate (etac), glycol ethers,
methyl ethyl ketone (MEK) and isopropanol
(IPA).
Blends of aliphatic and aromatic solvents are
also used to make paints and coatings.
For polymers, expandable polystyrene (EPS) and
polyurethane (PU) foam are used in insulation.
Polyurethanes are made of methylene diphenyl
diisocyanate (MDI), toluene diisocyanate (TDI)
and polyols.
High-density polyethylene (HDPE) is used in
pipe. Polyvinyl chloride (PVC) is used to make
cladding, window frames, wires and cables,
flooring and roofing membranes.
Unsaturated polyester resins (UPR) are used to
make coatings and composites.
Vinyl acetate monomer (VAM) is used to make
paints and adhesives.
Each new home built represents thousands of
dollars’ worth of chemicals and derivatives
used in the structure, or in the production of
component materials.
Please also visit the ICIS topic page
on construction
Thumbnail shows a home being built. Image
by NAHB.
