Last year was largely a good one for the nation’s homebuilders, which were able to offer rate buydowns to attract more clients while maintaining double-digit profit margins.
Additionally, the competition from existing home sellers was somewhat absent. An estimated 668,000 new homes were sold in 2023, 4.2% more than the figure of 641,000 in 2022, according to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development. In the fourth quarter of 2023, almost 32% of U.S. single-family homes for sale were new construction, similar to the percentage from a year earlier and good for the highest level of any fourth quarter on record.
But homebuilders still grappled with numerous issues. High interest rates, rising inflation, growing labor costs and worker shortages weighed the most on homebuilders in 2023, and they’re poised to remain top of mind in 2024.
According to the January 2024 survey for the NAHB/Wells Fargo Housing Market Index (HMI), 90% of builders reported high interest rates as a significant issue in 2023, while 77% expected them to be a problem in 2024. Rising inflation came in second among the most widespread problems of 2023, cited by 83% of builders. In 2024, 52% expect it to remain an obstacle.
Third, the cost and availability of labor were also major concerns in 2023. In 2011, only 13% of homebuilders worried about the cost of labor, versus 87% in 2019. This share decreased to 74% in 2023, while 75% expect the cost and availability of labor to remain a significant hurdle in 2024.
Only 63% of homebuilders cited the prices of building materials as a significant issue in 2023, due in part to the single-family construction slowdown. About 58% expect this to remain an issue in 2024.
On the bright side, attracting buyers to the market last year was not a widespread difficulty, but homebuilders fear that might change. Even as mortgage rates have declined since November and home price growth has eased, 77% of builders now think that buyers might postpone their home purchase decision while waiting for better conditions. Only 71% viewed this as a problem in 2023.
Additionally, builders cited negative media reports as a significant issue that is expected to continue in 2024.
