Home builders

Despite rising costs and labor shortages, homebuilders remain optimistic

Later this morning we will get data on how many house construction projects were started in november. We know that some building materials are in short supply and builders are struggling to find workers. That said, a new clue from the National Association of Home Builders and Wells Fargo found that builder confidence rose in December.

Homebuilder confidence is growing because builders know there is a lot of demand for what they are doing.

“The stock of existing houses is quite low, which supports the demand for new construction”, said Robert Dietz, chief economist for the National Association of Home Builders.

That low home inventory gives homebuilders a lot of clout, said Mark Vitner, senior economist at Wells Fargo. As a result, he said, builders are more likely to focus on building homes with higher profit margins.

“So we’re seeing a lot more interest in building bigger, more expensive homes,” Vitner said, adding that many big investors were interested in buying rental housing – entire neighborhoods of homes built to be rented out. .

“From the homebuilder’s perspective, it offers economies of scale. Because they build a lot of houses close to each other. They have a better idea of ​​what to order,” he said.

Vitner said that’s good news for builders, but not so much for potential home buyers — they may find it harder to compete with investors for new homes.