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New Home Sales Jump in March on High Consumer Demand

New Home Sales Jump in March on High Consumer Demand

The home building market is hot right now. There aren't enough inventory homes of any kind available so people are building new. Continue below for the full article from the National Association of Home Builders for more information on high consumer demand for new homes

New Home Sales Jump in March on High Consumer Demand

(NAHB) 

Low interest rates and strong consumer demand fueled a solid increase in new home sales in March, despite the ongoing building materials challenges impacting the industry. Sales of newly built, single-family homes rose 20.7 percent from an upwardly revised February number, to a 1.02 million seasonally adjusted annual rate, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. This is the highest sales pace since September 2006.

“Our members are seeing strong buyer traffic as continued low mortgage rates are helping fuel sales,” said Chuck Fowke, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Tampa, Fla. “However, builders are still grappling with major supply chain issues and soaring materials costs, which are causing construction delays and preventing them from adding to the already very low inventory.”

“Despite the increase in sales, housing affordability remains a major concern,” said NAHB Assistant Vice President of Forecasting Danushka Nanayakkara-Skillington. “With building material pricing, the challenge for builders in 2021 will be to deal with higher input costs while making sure home prices remain within reach for American home buyers.”

A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the March reading of 1.02 million units is the number of homes that would sell if this pace continued for the next 12 months.

Inventory fell to a 3.6 months' supply, with 307,000 new single-family homes for sale, 44.6 percent lower than March 2020.

Homes sold that have not started construction are up 150 percent over last year, an indicator of increasing delays and higher costs associated with construction.

The median sales price was $330,800, up from the $328,200 median sales price posted a year earlier.

Regionally on a year-to-date basis new home sales declined 3.3 percent in the West, and rose in the other three regions, up 36.6 percent in the Northeast, 53.9 percent in the Midwest and 50.5 percent in the South.

Skyrocketing Lumber Prices Add Nearly $36,000 to New Home Prices

Skyrocketing Lumber Prices Add Nearly $36,000 to New Home Prices

Wondering why the cost to build a new townhouse floor plan is going up? Skyrocketing lumber prices. Supply chain difficulties seem to play the biggest role in the surge in prices, read the full article from the National Association of Home Builders for more information.

Skyrocketing Lumber Prices Add Nearly $36,000 to New Home Prices

(NAHB) 

Soaring lumber prices that have tripled over the past 12 months have caused the price of an average new single-family home to increase by $35,872, according to new analysis by the National Association of Home Builders (NAHB). This lumber price hike has also added nearly $13,000 to the market value of an average new multifamily home, which translates into households paying $119 a month more to rent a new apartment. Further adding to housing affordability woes, other building material prices have been steadily rising since 2020 and, like lumber, are in short supply as well.

“This unprecedented price surge is hurting American home buyers and home builders and impeding housing and economic growth,” said NAHB Chairman Chuck Fowke, a custom home builder from Tampa, Fla.

The latest Random Lengths prices as of the week ending on April 23 show the price of framing lumber near $1,200 per thousand board feet-up nearly 250 percent since last April when the price was roughly $350 per thousand board feet.

During this remarkable runup, NAHB has been monitoring lumber prices and their effect on the housing market. In February 2021, NAHB reported that rising prices had added $24,000 to the price of a new home. Last August, rising prices resulted in the average price of new single-family homes to increase by $16,000.

“These lumber price hikes are clearly unsustainable,” said Fowke. “Policymakers need to examine the lumber supply chain, identify the causes for high prices and supply constraints and seek immediate remedies that will increase production.”

NAHB calculated these average home price increases based on the softwood lumber that goes into the average new home, as captured in the Builder Practices Survey conducted by Home Innovation Research Labs. Included is any softwood used in structural framing (including beams, joists, headers, rafters and trusses), sheathing, flooring and underlayment, interior wall and ceiling finishing, cabinets, doors, windows, roofing, siding, soffit and fascia, and exterior features such as garages, porches, decks, railing, fences and landscape walls.

The softwood products considered include lumber of various dimensions (including any that may be appearance grade or pressure treated for outdoor use), plywood, OSB, particleboard, fiberboard, shakes and shingles-in short, any of the products sold by U.S. sawmills and tracked on a weekly basis by Random Lengths.

 

Record-High Lumber Prices are Hammering Housing Affordability

Record-High Lumber Prices are Hammering Housing Affordability

From the National Association of Home Builders (NAHB):

Soaring lumber prices are adding thousands of dollars to the cost of a new home, pricing out millions of potential home buyers and impeding the residential construction sector from moving the economy forward, according to the National Association of Home Builders (NAHB).

“According to Random Lengths, the price of lumber hit a record high this week and is up more than 170 percent over the past 10 months,” said NAHB Chairman Chuck Fowke, a custom home builder from Tampa, Fla. “NAHB is urging President Biden and Congress to help mitigate this growing threat to housing and the economy by urging domestic lumber producers to ramp up production to ease growing shortages and to make it a priority to end tariffs on Canadian lumber shipments into the U.S. that are exacerbating unprecedented price volatility in the lumber market.”

Lumber price spikes are not only sidelining buyers during a period of high demand, they are causing many sales to fall through and forcing builders to put projects on hold at a time when home inventories are already at a record low.

“The increase in lumber prices is forcing our company to delay construction starts, which will only exacerbate the lack of supply in our market,” said NAHB First Vice Chairman Jerry Konter, a home builder and developer from Savannah, Ga.

Alicia Huey, a high-end custom home builder from Birmingham, Ala., and second vice chairman of NAHB, said that the price of her lumber framing package on an identically-sized home has more than doubled over the past year from $35,000 to $71,000. “This increase has definitely hurt my business,” she said. “I’ve had to absorb much of this added cost and even put some construction on hold because I would be losing money by moving forward.”

“Appraisers are not taking rising lumber costs into account, which is disrupting home sales and preventing closings,” added NAHB Third Vice Chairman Carl Harris, a custom builder from Wichita, Kan.

Housing has been an economic bright spot amid the COVID-19 pandemic, but the industry’s potential to lead the economy forward is limited as long as lumber remains expensive and scarce. A recent survey of NAHB members reveals that 96 percent said that inconsistent access to building materials are their most urgent concern. In turn, supply shortages are leading to soaring prices. And it’s not just skyrocketing lumber prices that builders are dealing with. The price of oriented strand board has more than tripled since last April.

“Clearly these price increases are unsustainable, particularly in light of a continued housing affordability crisis,” said Fowke. “Given this ongoing period of high demand, the Commerce Department should be investigating why output from lumber producers and lumber mills are at such low levels.”

Multifamily Housing Down in 2021 but Will Rebound in 2022

Multifamily Housing Down in 2021 but Will Rebound in 2022

From the National Association of Home Builders (NAHB):

Regulatory and supply-side challenges coupled with slowing rent growth and rising vacancy rates will weaken the multifamily construction market in 2021. However, the development market should stabilize by 2022, according to economists from the National Association of Home Builders (NAHB) who participated in an online press conference as part of the 2021 NAHB International Builders' Show® virtual experience (IBSx)

“Though the multifamily sector is performing much better than nonresidential construction, developers are facing stiff headwinds in 2021,” said NAHB Chief Economist Robert Dietz. “Shortages and delays in obtaining building materials, rising lumber and OSB prices, labor shortages and a more ominous regulatory climate will aggravate affordability woes and delay delivery times.”

NAHB analysis of Census data reveals that 34 percent of total multifamily construction occurred in lower density, lower cost markets in 2020. “These areas have outpaced higher density markets over the past four quarters and we anticipate this trend will continue this year,” said Dietz.

Turning to the forecast, multifamily starts are expected to fall 11 percent this year to 349,000 units from a projected total of 392,000 in 2020. The downturn will be short-lived, as multifamily production is expected to post modest gains in 2022, up 5 percent to 365,000 units.

After four years of a steady, upward trajectory, rent growth flattened in 2020. “Due in part to pandemic-related issues, rent growth in December 2020 was up just 0.4 percent from a year ago,” said Danushka Nanayakkara-Skillington, NAHB’s Assistant Vice President of Forecasting and Analysis.

Looking at another metric, four of the top five multifamily markets, as measured by the number of permits, posted yearly declines from November 2019 to November 2020.

The New York-Newark-Jersey City region, the largest in the nation, registered a 14 percent drop in permits. Houston-The Woodlands-Sugarland, Texas, was down 10 percent, Los Angeles-Long Beach-Anaheim, Calif., fell 16 percent and Dallas-Fort Worth-Arlington, Texas, posted the sharpest decline at 46 percent. Meanwhile, Austin-Round Rock, Texas, the No. 2 market in the nation, posted a robust 54 percent increase in permits.

Single-Family Starts Leveling Off

2020 was a strange year. While the economic impact of the coronavirus was devastating for many businesses, it was a boon to others. The housing industry saw not only an increase in demand, but a shift if what consumers wanted. Housing affordability continues to be a problem that needs addressing, but demand is high and labor and material needs are struggling to keep up. 

With that in mind, single family construction remained strong, though leveled off in November. Continue reading for the complete article from the National Association of Home Builders.

Single-Family Starts Leveling Off at Strong Pace in November

(NAHB)

Single-family starts flattened in November as builders struggled to meet demand, while overall housing starts increased 1.2 percent to a seasonally adjusted annual rate of 1.55 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The November reading of 1.55 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts increased 0.4 percent to a 1.19 million seasonally adjusted annual rate. The multifamily sector, which includes apartment buildings and condos, increased 4.0 percent to a 361,000 pace.

“Though single-family construction continued to be strong in November, builders are unable to keep up with demand due to rising regulatory and construction costs and shortages of lots and labor,” said Chuck Fowke, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Tampa, Fla. “The incoming Biden administration needs to focus on policies to improve housing affordability and to increase supply to help housing continue to lead the economy forward.”

“The single-family construction sector appears to be leveling off at strong levels, with permits roughly at a flat level from September to October,” said NAHB Chief Economist Robert Dietz. “Nonetheless, the growth for single-family construction was a true bright spot amid economic challenges in 2020, with single-family starts up 10 percent year-to-date and posting the best year since the Great Recession. However, the backlog continues to grow, with the number of single-family homes permitted but not started construction up 16.3 percent from November 2019 to November 2020 as material delays and higher costs hold back building.”

On a regional and year-to-date basis (January through November of 2020 compared to that same time frame a year ago), combined single-family and multifamily starts are 14.4 percent higher in the Midwest, 7.6 percent higher in the South, 5.4 percent higher in the West and 3.3 percent lower in the Northeast.

Overall permits increased 6.2 percent to a 1.64 million unit annualized rate in November. Single-family permits increased 1.3 percent to a 1.14 million unit rate. Multifamily permits increased 19.2 percent to a 496,000 pace.

Looking at regional permit data on a year-to-date basis, permits are 5.7 percent higher in the Midwest, 6.9 percent higher in the South, 0.7 percent higher in the West and 4.4 percent lower in the Northeast.

Affordability and Lack of Supply Put a Dent in New Home Sales

2020 was a great year for the home building and remodeling industry. More people than ever before worked from home which helped spike the demand for homes with offices. The ability to work remotely allowed people to move away from the office and into communities that were more suitable for their lifestyle. Many people fled the cities to build homes with more space - larger lots. 

Home remodeling also flourished. Whether DIY or hiring a professional company - homeowners wanted to create a space that worked for their new normal - working from home, home schooling etc.

While the current pandemic has been a boom to the housing industry there are still concerns  - lack of supply and affordability. In this recent article from the National Association of Home Builders they report that the market remains strong after taking a bit of a dip in November. Still, affordability and supply will continue to be issues in the current climate. Continue below for the full article from the NAHB.

Affordability and Lack of Supply Put a Dent in New Home Sales

New home sales dipped in November, but remained at a solid level as builders struggled to meet demand and gain access to building materials.

Sales of newly built, single-family homes in November fell 11 percent to an 841,000 seasonally adjusted annual rate, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. Despite the monthly decline, the November rate is 20.8 percent higher than a year ago.

“Though the market remains strong, the pace of sales pulled back in November as inventory remains low and affordability concerns persist as builders grapple with a shortage of lots, labor and building materials,” said Chuck Fowke, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Tampa, Fla.

“The home building industry saw a historic gap between the pace of new home sales and construction of for-sale single-family housing this fall,” said NAHB Chief Economist Robert Dietz. “As a result, the pace of new home sales was expected to slow to allow construction to catch up. This appears to have occurred in November as inventory of completed, ready to occupy new homes was down 43 percent compared to November 2019 at just 43,000 homes nationwide.”

A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the November reading of 841,000 units is the number of homes that would sell if this pace continued for the next 12 months.

Inventory rose slightly to a 4.1 months’ supply, with 286,000 new single-family homes for sale, 11.2 percent lower than November 2019.

The median sales price was $335,300. The median price of a new home sale a year earlier was $328,000.

Regionally, on a year-to-date basis new home sales were up in all four regions: 28.2 percent in the Northeast, 24 percent in the Midwest, 16.9 percent in the South and 20.5 percent in the West.