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FMG Law Blog Line

Homebuilder Confidence Doesn’t Translate to a Homebuilding Boom

Posted on: December 21st, 2016

By: Kristian Smith

Confidence doesn’t always translate to construction. A survey from the National Association of Home Builders released earlier this month showed the highest level of homebuilder confidence in 11 years. But the numbers released by the U.S. Census one day later showed home construction plummeted by 19 percent this month.

These numbers do not seem to make much sense, but there are several reasons for the discrepancy.

Due to factors like the improving economy, high demand for housing, and the possibilities for business improvement under “Trumponomics,” many are optimistic about the housing market, but this has not translated to a boom in building.

Builders are dealing with costly new regulations, rising costs for land and materials, and a labor shortage that could continue to worsen. In addition, many builders remain cautious after the recession and seem to be focusing more on quality over quantity – high demand and low supply allows builders to demand a higher price for each home.

Also, at the end of 2012, when home construction was still reeling from the 2008 recession, confidence in home building began to increase but actual home construction did not. Experts say that as home building continues to increase in coming years, the numbers for confidence and construction will become more similar.

Some experts in the home construction industry also believe that the way the surveys weigh confidence may be skewed.

For any questions, please contact Kristian Smith at [email protected].

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