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Low existing home inventory and strong buyer demand will keep housing moving forward in 2022 even as builders continue to grapple with ongoing building material production bottlenecks and labor shortages that will limit the pace of construction and keep upward pressure on home prices, according to economists speaking at the International Builders’ Show in Orlando, Florida, Feb. 8.
“Building material costs are up 21 percent compared to a year ago,” said NAHB Chief Economist Robert Dietz. “Their price and availability, along with persistent supply chain bottlenecks, remains the most urgent challenge for builders as they seek to boost production to meet rising demand.”
Meanwhile, builders are contending with persistent labor shortages, with the government reporting more than 300,000 job openings in the construction industry in December. NAHB estimates that the residential construction sector will need to add 740,000 workers a year just to keep pace with the industry’s growth, retirements and departures.
On the interest rate front, inflation is running well above the Federal Reserve’s 2-percent target rate and the Fed has signaled it will begin tightening monetary policy in March, generating upward pressure on mortgage rates. NAHB anticipates the Fed will conduct four 25 basis point federal funds rate increases in 2022 and that the average 30-year fixed rate mortgage will top 4% by the end of 2022.