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New American Focus:
Mortgage & Real Estate

New American Focus: Mortgage & Real Estate

Translating the complexity of the markets into a concise and easy to digest format. Watch videos, read blogs, and view key data on short and medium term trends impacting interest rates, so you can make the right decision for your situation.

New Home Construction Slows as Lumber Prices Rise

New home build | New Home Construction Slows as Lumber Prices Rise

There’s nothing the housing market needs more right now than more available homes hitting the market. Unfortunately, it appears that construction of new homes is slowing down at just the wrong time.

According to new data from the Census Bureau and Department of Housing and Urban Development, new home construction fell in February by more than 10% compared to January’s figures. Building permits were down too, falling 10.8% below January.

The reason for the decline: rising lumber costs, according to the National Association of Home Builders.

“Despite strength in buyer traffic and lack of existing inventory, builders are slowing some production of single-family homes as lumber and other material costs, along with interest rates, continue to rise,” said NAHB Chairman Chuck Fowke. “Shortages of lumber and other building materials, including appliances, are putting future construction expansion at risk.”

As Fowke noted, the demand for new homes is there, but the supply is simply not able to keep up.

According to NAHB Chief Ecomist Robert Dietz, single-family housing starts (construction beginning on a new single-family home) are actually up 6.4% in the first two months of the year compared to 2020.

But Dietz notes that there has been a 36% increase in the last year of single-family homes that were permitted to begin construction but not actually started, which Dietz says is due to “cost and availability of materials.”

Dietz still believes that new home construction will increase in 2021, but cautions that there are some headwinds that could keep construction from reaching its highest potential.

“Single-family home building is forecasted to expand in 2021, but at a slower rate as housing affordability is challenged by higher mortgage rates and rising construction costs,” Dietz said. “The February winter storm Uri also held down home building in Texas and some neighboring states.”

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