Home builders have high hopes for the year ahead, anticipating a solid real estate market while being encouraged by the promises of a new administration.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) posted 67 this month, a decrease of only two points from December 2016, with the measure of “buyer traffic” at 51, the measure of “current sales conditions” at 72, and the measure of “sales expectations” at 76. An above-50 reading indicates more builders have a positive outlook than a negative one.
“Builders begin the year optimistic that a new Congress and administration will help create a better business climate for small businesses, particularly as it relates to streamlining and reforming the regulatory process,” said Granger MacDonald, NAHB chairman, in a statement on the Index.
The current cost of complying with regulations is constraining construction businesses to the detriment of new housing stock, which remained severely limited at the beginning of the year. The shortage is especially pronounced in the starter home segment, which is preventing first-time homebuyers from entering the market. Lessening the burden could open up more build opportunities, alleviating demand.
Still, approximately 40 percent of those recently surveyed by the Associated General Contractors of America organization are “worried” that regulations will bear down further in the future.
“While the new administration and its stated policy objectives offer many reasons for optimism, there is a significant risk to the industry if the new Congress and administration under-deliver,” Stephen Sandherr, CEO of the organization, said in a recent statement. “If plans to invest in infrastructure, reform healthcare laws and roll back regulations are delayed, many contractors will likely scale back their plans to expand headcounts.”
Nearly three-quarters of construction businesses expect to hire more contractors in 2017, according to the AGCA, with the majority planning to grow between 1 and 25 percent. A lack of younger contractors is a factor, with the NAHB estimating the median age in the sector at 42.
“Concerns going into the year include rising mortgage interest rates, as well as a lack of lots and access to labor,” said Robert Dietz, NAHB chief economist.
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