Cost of Labor, Land, and Materials May Hinder the Housing Market

January 20, 2021

Homebuilder confidence reached a record high a few months ago when the pandemic sent city-dwellers flocking to the suburbs. Now, the increasing costs of construction are eroding confidence. Builder confidence for single-family homes fell 3 points in January, down to 83, according to the Wells Fargo Housing Market Index. The index reached an all-time high of 90 last year. 

Anything above 50 is considered positive, and homebuilders and analysts both have high expectations for 2021, but the high demand and low availability of land and raw materials, as well as increasing labor costs, may mean the market will fail to reach the heights it did last year. Expectations for the next six months fell this month, as did buyer traffic, suggesting that high prices and low inventory may be keeping some buyers on the sidelines.

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