Builder Confidence Holds Strong as 2020 Ends

2020 was a uniquely challenging yet busy year for the home building industry. Will that productivity continue into 2021?

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The impact of COVID-19 disrupted countless businesses and industries across the world in 2020, forcing many established companies to make difficult decisions. One outlier to this trend was the home building industry in the U.S., which for the most part remained stable and highly productive throughout the economic and societal turbulence.

It’s not clear if the industry will maintain that success in the new year. But one metric suggests home builders certainly expect it to.

The latest National Association of Home Builders/Wells Fargo Housing Market Index posted a score of 86 in December 2020. While down slightly from November’s record-high 90, it was still the second-highest score in the 35-year history of the metric and a sign that builder optimism remains high across the United States. (The Index ranges from 0 to 100.)

In a statement on the latest HMI, NAHB chairman Chuck Fowke warned that the housing market could see some challenges in the coming months despite sustained demand for housing.

“Housing demand is strong entering 2021, however the coming year will see housing affordability challenges as inventory remains low and construction costs are rising,” said Fowke, a custom home builder from Tampa, Fla. “Policymakers should take note to avoid increasing regulatory costs associated with land development and residential construction.”

Rising costs of materials, and in particular the prohibitively high cost of lumber, were one of the major factors holding back the construction industry in 2020. New reports suggest material shortages will continue in 2021.

“The issues that have limited housing supply in recent years, including land and material availability and a persistent skilled labor shortage, will continue to place upward pressure on construction costs,” said NAHB Chief Economist Robert Dietz. “As the economy improves with the deployment of a COVID-19 vaccine, interest rates will increase in 2021, further challenging housing affordability in the face of strong demand for single-family homes.”

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