New construction rises while builder confidence dips

Homebuilder confidence dipped in January for the first time in four months, according to the National Association of Homebuilders. Despite homebuilder hesitation, year-over-year new construction growth edged higher in January. While strong consumer demand and the acute housing shortage support the need for new construction, the combination of higher building material costs, worsening labor shortages, and rising mortgage rates point to another competitive year in the housing market.

“It will be interesting to see how the housing market reacts to rising mortgage rates. Home price growth may slow, but it will likely still be a tough market for buyers as inventory remains scarce,” said Jonathan Kanarek, managing director of property intelligence solutions at Verisk.

Housing affordability is expected to continue to be a key consideration in 2022. Many homeowners may choose to invest in their existing properties instead of putting their homes up for sale due to the lack of available inventory in their price range. While existing housing maintenance has experienced steady year-over-year growth, remodeling activity – a subset of maintenance that includes renovations, additions, and alterations – has declined in recent months. It’s possible that rising building material costs have deterred homeowners from embarking on larger-scale projects.

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