According to a recent report by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, new construction was on the rise in August 2021. U.S. homebuilders started construction on 1.615 million homes — that’s up 3.9 percent from July 2021 and 17.4 percent higher than a year ago.
Impressively, new construction is spiking while builders continue to face material shortages and a tight construction labor market. “The nation’s homebuilders are finding ways to defy expectations, keep their pipelines moving, and put up more homes,” Zillow economist Matthew Speakman said in a statement. “It’s not all perfect, and some creativity is being shown by builders to keep things moving. These choppy waters are unlikely to calm anytime soon, but builders are continuing to find ways to stay afloat.”
Even though lumber prices are still high which keeps home prices elevated, the price for lumber is lower than it was in 2020. During the spring and summer of 2020, lumber prices were high enough to add almost $30,000 to the price of an average new single-family home. Since lumber prices are coming down, consumers and builders may benefit from decreased construction costs only if lumber prices stay low for an extended period.
“Although the cash price of framing lumber has fallen dramatically in recent weeks, the same can’t be said of other major parts of home construction,” said David Logan, a senior economist for the National Association of Home Builders (NAHB). “The average price of oriented strand board remains 500% greater, for example, versus April of 2020.”
In addition, labor is in short supply, which is a potential reason for the continual rise in home prices. But there is a change in the air as the world opens up more opportunities for travel and people are able to leave their homes. With more freedom to move across state lines, there is less interest in buying or building a new home, which drives down home prices even further. However, lumber prices will more than likely go back up since the vacation season ended in August. Whether or not there will be more affordable housing will depend on whether prices for lumber stay consistently low and if the labor shortage will turn around.
If lumber prices and labor shortages continue to inhibit new construction, there is still potential to create more affordable housing if prices for other building materials decrease in cost. This would be a great relief for buyers who want to get a fresh start in a new home at a lower price point. Real estate agents can continue to help their clients find new builds and be their advocates during the purchasing process.
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