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U.S. Homebuilder Confidence Unexpectedly Drops In January

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Reflecting concerns about rising material costs and the resurgence of the coronavirus, the National Association of Home Builders released a report on Wednesday showing an unexpected drop in U.S. homebuilder confidence in the month of January.

The report said the NAHB/Wells Fargo Housing Market Index fell to 83 in January after sliding to 86 in December. The continued decline surprised economists, who had expected the index to come in unchanged.

With the unexpected decrease, the housing market index pulled back further off the record high of 90 set in November.

"While housing continues to help lead the economy forward, limited inventory is constraining more robust growth," said NAHB Chief Economist Robert Dietz.

He added, "A shortage of buildable lots is making it difficult to meet strong demand and rising material prices are far outpacing increases in home prices, which in turn is harming housing affordability."

The unexpected drop by the headline index reflected decreases by all three of the component indices, with the gauge charting traffic of prospective buyers showing a notable decline to 68 in January from 73 in December.

The index gauging current sales conditions and the component measuring sales expectations in the next six months both fell by two points to 90 and 83, respectively.

"Despite robust housing demand and low mortgage rates, buyers are facing a dearth of new homes on the market, which is exacerbating affordability problems," said NAHB Chairman Chuck Fowke.

"Builders are grappling with supply-side constraints related to lumber and other material costs, a lack of affordable lots and labor shortages that delay delivery times and put upward pressure on home prices," he added. "They are also concerned about a changing regulatory environment."

On Thursday, the Commerce Department is scheduled to release a separate report on new residential construction in the month of December.

Housing starts are expected to rise to an annual rate of 1.560 million in December from 1.547 million in November, while building permits are expected to drop to a rate of 1.604 million from 1.635 million.

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