With Spring Ahead, Home Builders Face Headwinds in Land Shortages, Tight Credit

With Spring Ahead, Home Builders Face Headwinds in Land Shortages, Tight CreditThe U.S. housing market has been somewhat in a holding pattern over this often extreme winter. But even with Spring looming, there are headwinds to overcome in the form of shortages of lots to build.
There are also ongoing battles to secure builder financing.
To keep pace with demand, builders must now pay top-dollar for prime urban locations, reports CNBC. Builders’ profit margins could be squeezed this year, even as house prices continue their upward trend.
The fastest solution for the bigger builders, according to some analysts and fund managers, are to buy up small, privately-owned builders facing the opposite problem: plenty of land but limited access to bank finance, CNBC reports.
David Crowe, chief economist at the National Association of Home Builders, projects that new home construction in the United States will jump by about 25 percent this year, up from 18 percent last year.
But his forecast depends on homebuilders buying enough land in sought-after urban areas.
“Builder confidence has been in a holding pattern the past three months,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Del.  “Looking ahead, as the spring home buying season gets into full swing and demand increases, builders are expecting sales prospects to improve in the months ahead.”
Builders announced today that their confidence in the market for newly built, single-family homes rose one point to 47 in April from a downwardly revised March reading of 46, on the NAHB/Wells Fargo index. A mark above 50 means more builders are postive about market conditions, versus those who have a negative outlook.
“Job growth is proceeding at a solid pace, mortgage interest rates remain historically low and home prices are affordable,” said  Crowe. “While these factors point to a gradual improvement in housing demand, headwinds that are holding up a more robust recovery include ongoing tight credit conditions for home buyers and  the fact that builders in many markets are facing a limited availability of lots and labor.”

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