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News May 21, 2020

Homebuilder sentiment improves after COVID-19 slump

Homebuilders’ dreary sentiment about the state of their industry in April amid the COVID-19 crisis now appears to be slowly improving as states lift stay-at-home orders and potential homebuyers return to the market, according to Forbes.

According to the latest National Association of Home Builders/Wells Fargo Housing Market Index, builders’ sentiment gained seven points in May, rising to 37 points. Any reading of the index below 50 indicates poor expectations.

“The fact that most states classified housing as an essential business during this crisis helped to keep many residential construction workers on the job, and this is reflected in our latest builder survey,” said NAHB Chairman Dean Mon.

Although the current unemployment rate in the construction sector will not be available for at least two more months, the Bureau of Labor Statistics reported nearly 618,000 layoffs in March—a nearly 250% increase from a year ago. And with some projects halting operations, competition decreased among builders for skilled laborers.

“The trades aren't quite as busy as they were,” said Lesley Deutch, principal with John Burns Real Estate Consulting. “[Builders] are able to manage the costs a little bit better. Before when you had one trade working eight different jobs, sometimes it would be paid more to get a job done on one builder’s site versus the other.”

However, Deutch said that is shifting as some housing markets start to rebound. According to a survey by Meyers Research, 5% of builders increased their staff during the week of May 11; 65% have not changed their employee rosters; and about 19% laid off workers. Some homebuilders underwent furloughs during the early days of the COVID-19 pandemic and now are calling workers back as demand starts to climb.

NAHB Chief Economist Robert Dietz said low interest rates have helped sustain the demand for new homes.

“As many states and localities across the nation lift stay-at-home orders and more furloughed workers return to their jobs, we expect this demand will strengthen,” he said. “Other indicators that suggest a housing rebound include mortgage application data that has posted four weeks of gains and signs that buyer traffic has improved in housing markets in recent weeks.”

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