The January NAHB/Wells Fargo Housing Market Index included a survey that identified the most significant problems builders faced in 2013, and expect to face in 2014.
The survey (comprised of five sections) included a handful of questions similar to those asked in previous years, allowing year-over-year comparison of results (you can see the breakdown of 2011, 2012, 2013, and 2014 results in this chart from NAHB's Eye on Housing blog, and later in the article). The drastic difference between survey responses in 2011 and 2014 paints a dramatic portrait of how the housing market has evolved in the past three years. For this purpose, our chart below pulls data points from 2011 and 2014 responses only, in order to bring more attention to the stark contrast between the two.
The problems builders expect to face in 2014 piggy-back on 2013 results, just a bit more exacerbated. Building material prices, (a small survey of 75 builders in September 2013 identified which industries charged more for materials in the past 12 months—drywall came in first at 28 percent) and labor supply remain the two biggest concerns for builders in 2014, with an increase of 13 percent and 12 percent respectively. Differing results from 2011's survey (and differing degrees of concern in general) are much more noteworthy.
Upon my first read of Eye on Housing's analysis of the results, I thought things were looking a little bleak. Two things stood out to me in their Y-o-Y chart of survey responses (to the right). First, that builders in 2014 are more worried overall about the issues displayed (362 percent total) than they were in 2013 (295 percent total), and secondly, builders were drastically less concerned about these issues in 2011 (213 percent total) compared to now.
What we don't see in the chart are responses to questions in all sections of the survey, which could speak to the dichotomy between 2011 and 2014 results. This is where the silver lining appears. Initially, it wasn't obvious to me that increased worry is actually a sign of life in the market. The bigger picture of results in the chart: fewer builders were concerned with incidentals of the building process in 2011, because they were more worried about not having a customer to build a home for. The grass always seems greener, but the significant problems anticipated in 2014 can actually be seen as an index of demand for new homes. From this perspective, these problems are just hurdles to the finish line—at least we're back in the race.