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Economic Report: Home builder confidence dips amid continued supply disruptions

The numbers: The National Association of Home Builders’ monthly confidence index dropped one point to a reading of 82 in February, the trade group said Wednesday. It was the second consecutive month that the index has dropped by that amount.

The decline matched the expectations of economists polled by MarketWatch, whose median forecast called for a reading of 82 in February.

Despite the decline, the reading still remains strong. Index readings over 50 are a sign of improving confidence.

What happened: The index that measures sentiment regarding sales over the next six months fell two points to 80, while the gauge regarding prospective buyers slipped four points to 69. The bright side builders was the index that measures current sales conditions rose by one point to 90.

On a regional basis, attitudes among home builders have improved in the Northeast and West, but worsened in the Midwest and South.

The big picture: Supply-chain disruptions remain an ever-present headache for home builders. National Association of Home Builders chairman Jerry Konter noted in the report that “that many builders are waiting months to receive cabinets, garage doors, countertops and appliances.”

“These delivery delays are raising construction costs and pricing prospective buyers out of the market,” Konter, who also works as a home builder and developer from Savannah, Ga., said.

However, demand for newly-built homes remains high as prospective buyers have so few options in the market for existing homes. Still, pricing is a concern in an environment where mortgage rates are rising.

Looking ahead: “Low inventories support building activity, but worker shortages, high prices and limited material availability remain constraints for builders,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said in a research note.

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