Builder confidence reached a nearly 19-year high at the end of 2017, according to the NAHB/Wells Fargo Housing Market Index. While the first reading of 2018 wasn't quite as high, a positive level of 72 indicates a solid amount of continued optimism. Additionally, the Remodeling Market Index showed strength, coming in at a level of 60 and marking its 19th consecutive quarter in positive territory.

While housing starts dipped slightly in December, the 2017 totals for single-family construction were positive — nearly 9% above the 2016 totals. Multifamily starts, however, were down almost 10% as that market finds a balance between supply and demand. NAHB expects single-family starts to increase nearly 5% in 2018, while multifamily starts will decline slightly.

A recent NAHB survey of builders identified the top concerns for the industry. Building material prices and labor costs/availability were cited by 84% of builders as significant problems they expect to face in 2018. The next most commonly cited challenge was the cost/availability of lots, referenced by 62% of builders. Despite these obstacles, the industry continues to expand, adding 86,400 jobs over the last year as housing demand continues to rise.

–NAHB Chief Economist Robert Dietz

Industry Insights

Single-Family Sector Boosts Housing Production

Starts declined in December, but 2017 overall saw significant gains.

Builder Confidence Remains Strong as New Year Starts

Changes to the tax code expected to boost small business and the broader economy.

Softwood Lumber, OSB and Gypsum Lead 2017 Price Increases

Prices for all major construction materials increased last year.

Pending Sales Rose in November

Some experts project existing home sales and price growth will slow.

Apartment and Condo Absorption Climbs

The 2017 rate is still lower compared to those seen from 2012 to 2015.

Economic Indicators

Property Tax Revenue Increases Yet Again

It has been five and a half years since the last decline.

Consumer Confidence Drops in December

But the portion of prospective home buyers increased from the previous month.

Mortgage Rates Rose in 2017

However, rates remain at historically low levels.

Core Inflation Remains Steady

Energy prices largely contributed to the increase.

Southern and Western States Lead Population Growth

Eight states registered population declines in 2017.

Employment Conditions

Materials Prices, Labor Access Top Challenges for 2018

Attempts to limit the mortgage interest deduction also a widespread concern.

Share of Immigrant Workers Continues to Grow

U.S.-born workers have been more reluctant to return to construction.

Report Estimates 148,000 New Jobs in December

Unemployment remained at 4.1% for the third consecutive month.

Employment Increased in Most States

Texas, California and New York enjoyed the largest growth.

Builders Start the New Year Filled with Optimism

Posted About Six Years Ago by NAHB

January 4, 2018

Builders Start the New Year Filled with Optimism
Confidence among builders at the end of 2017 reached its highest measure in more than 18 years. Much of that optimism is due to tight existing home inventory, a solid economy with low unemployment, and an improving policy environment that offers hope for reduced regulatory burdens.

Census estimates of home construction also helped fuel the rise in builder confidence. By November, single-family starts were up 9% on a year-to-date basis, and sales of new single-family homes had increased 17.5% from the month prior — reaching the fastest sales pace in more than 10 years. Growth for residential construction is expected to continue, as a growing share of new homes are being sold from the "not under construction" class.

However, supply-side headwinds will continue to hamper housing in 2018, as will the tight labor market and rising prices for materials. The Federal Reserve will continue to increase interest rates, which will slowly reduce housing affordability, though that impact will be offset by increases in after-tax income. Some markets — particularly high-tax/high-cost markets in coastal areas — will experience some negative effects due to tax law changes. But from a national perspective, single-family construction will continue to expand.

NAHB Chief Economist Robert Dietz

Starts and Sales

New Home Sales Hit Post-Recession High in November

All regions of the U.S. reported growth, led by a 30% uptick in the Northeast.

Existing Sales Surge in November

Year-end rally leads to the most sales since December 2006.

Private Residential Spending on the Rise

Single-family construction spending increased to its highest annual rate in a decade.

Permit Volume Grows in Most States

State-by-state comparisons show Texas atop most lists of permits issued.

Strong Estimates for Single-Family Starts

The rise in starts aligns with increased builder confidence.

Industry Insights