Unabated construction challenges underscore urgency of housing reforms.
Despite strong housing starts performance, the construction industry continued to face persistent headwinds in September, according to the National Multifamily Housing Council (NMHC).
NMHC’s latest survey revealed that 90% of respondents had trouble with construction delays, with 78% of this group reporting delays in permitting and 86% experiencing start delays. The trade group noted that the share of respondents that reported delayed starts due to lack of availability in construction financing grew from 7% in March, to 15% in June, to 31% in September.
Consequently, builder confidence fell to an eight-year low in September, according to the National Association of Home Builders. NAHB chief economist Robert Dietz said that more than half of the builders in the survey reported using incentives to bolster sales, including mortgage rate buydowns, free amenities and price reductions, to attract buyers.
“Builder sentiment has declined every month in 2022, and the housing recession shows no signs of abating as builders continue to grapple with elevated construction costs and an aggressive monetary policy from the Federal Reserve that helped push mortgage rates above 6% last week, the highest level since 2008,” Dietz added.
“Buyer traffic is weak in many markets as more consumers remain on the sidelines due to high mortgage rates and home prices that are putting a new home purchase out of financial reach for many households,” said NAHB chairman Jerry Konter. “In another indicator of a weakening market, 24% of builders reported reducing home prices, up from 19% last month.”
However, data from NMHC’s survey findings showed that 76% of respondents experienced price increases in projects, at an average rate of 9%, due to building material costs that are still on the rise. Labor costs continued to climb as well, with 21% of respondents saying that labor costs had increased more than expected over the past three months, though encouragingly, that was the lowest percentage in the last three quarters.
On the bright side, lumber prices, which set the pandemic on a rollercoaster ride, now seem to be decreasing. On average, lumber prices in Q3 dropped 2% for the second consecutive quarter.
“The nation is facing extraordinary housing affordability challenges in the wake of the pandemic,” said NMHC president Doug Bibby. “Costs are up across the board, and projects are taking longer and longer to complete. Lawmakers at all levels of government should look at every policy option available to them to reform antiquated zoning, streamline the development process and incentivize the building of new housing of all types and at all price points.”