Flight to Suburbs: Homebuilder Sentiment Soars to Pre-Pandemic Heights
Homebuilder sentiment is soaring as Americans rethink their housing in the aftermath of urban looting and rioting, police defunding campaigns, surging shootings, and months of being shut inside due to the coronavirus pandemic.
The National Association of Home Builders/Wells Fargo Housing Market Index jumped 14 points to 72 in July, leaping over the 60 score economists had forecast.
That matches the index’s level for March, before the lockdowns and social distancing hit the U.S. economy. Scores above 50 are considered positive sentiment. Scores below suggest that builders consider conditions poor. In April, the index fell to 30.
The NAHB described the July reading as “a strong signal that the housing market is ready to lead a post-COVID economic recovery.”
“Builders are seeing strong traffic and lots of interest in new construction as existing home inventory remains lean,” said NAHB Chairman Chuck Fowke. “Moreover, builders in the Northeast and the Midwest are benefiting from demand that was sidelined during lockdowns in the spring. Low-interest rates are also fueling demand, and we expect housing to lead an overall economic recovery.”
The index is comprised of three components. Current sales conditions rose 16 points to 79. Sales expectations in the next six months climbed seven points to 75. Buyer traffic jumped 15 points to 58.
The surge in demand for housing has caught some builders off guard, short of materials, labort, and land after many builders nearly shut down operations in March and April.
“Lumber prices are at a two-year high, and builders are reporting rising costs for other building materials while lot and skilled labor availability issues persist,” said Robert Dietz, NAHB’s chief economist. “Nonetheless, the important story of the changing geography of housing demand is benefiting new construction. New home demand is improving in lower density markets, including small metro areas, rural markets and large metro exurbs, as people seek out larger homes and anticipate more flexibility for telework in the years ahead. Flight to the suburbs is real.”
Builder sentiment in the Northeast soared 22 points to 70, confirming anecdotes about residents of New York City and other big east coast cities seeking to move out of apartments and into roomier houses in the suburbed. Sentiment rose 18 points to 68 in the in the Midwest. In the South, the biggest region for homebuilding where sentiment was less depressed during the shutdowns, sentiment rose rosse 10 points to 73. In the West, the least hurt by the pandemic shutdowns, it rose 14 points to 80.