Home builders know the housing market. Their business depends on it. That's why the National Association of Home Builders keeps a monthly measure of how confident they are in the market for newly built single-family homes. If builders are optimistic, chances are the market is doing well.
In February, the index – which scores builders' responses on a scale where any number above 50 indicates more builders view conditions as good than poor – was up one point to 84, just below its all-time high. Robert Dietz, the NAHB's chief economist, says there are several factors keeping builders positive. “Demand conditions remain solid due to demographics, low mortgage rates, and the suburban shift to lower cost markets, but we expect to see some cooling in growth rates for residential construction in 2021 due to cost factors, supply chain issues, and regulatory risks,” Dietz said.
Despite those challenges, index components gauging current sales conditions and expectations for the next six months both show home builders are feeling optimistic about the 2021 market.
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