Builders begin to blame the drop in material price confidence just before the plunge in lumber prices
National Association of Home Builders
Rising material prices and supply chain shortages have pushed home builder confidence to its lowest level since August 2020. The latest Housing Market Index (HMI) from the National Association of Home Builders (NAHB) ) / Wells Fargo shows that builders’ confidence in the new-build single-family home market fell two points to 81 in June. A reading above 80 is, nonetheless, a signal of strong demand in a housing market short of inventory.
The NAHB’s statement on the monthly data release reads: “Higher costs and lower availability of softwood lumber and other building materials lowered builder sentiment in June” , says Robert Dietz, chief economist of the NAHB. “These higher costs have moved some new homes beyond the budgets of potential buyers, which has slowed the pace of home construction.
“In addition, these supply constraints lead to insufficient assessments and make it more difficult for builders to access construction loans. “
The prices of lumber, steel, plastics, gypsum, wallboard, insulation and cement have all been rising for months, setting many records. Data from Associated General Contractors shows that input costs in April jumped 19% from the same month last year, up from the 12.4% annual increase recorded in March. Data from the U.S. Bureau of Labor Statistics measured lumber and plywood prices reaching 86% from April 2020 to April 2021.
The United States imposed 24% tariffs on Canadian lumber in April 2017, hampering demand, and some Canadian mills have closed locations. Then, the pandemic shattered labor and supply chains, while causing a spike in home improvement and housing construction that pushed out demand and prices for lumber.
“You’re going to see this restriction for probably the next 12-18 months,” Thomas CEO Tony Uphoff said on Bisnow.com. Uphoff operates a product research and supplier selection platform for the real estate industry. “What is not clear from those following this is how long this residential real estate development boom will last.”
In the June 13 article, Bisnow reports that 56% of multi-family developers surveyed by the National Multifamily Housing Council between May 17 and June 1 reported delays caused by rising commodity prices and overall economic infeasibility. new projects.
In a sharp change, however, a June 15 Bisnow article reports that lumber prices are dropping to their lowest level since March. The record price of $ 1,711.20 per thousand board feet at the start of May is now less than $ 1,000 per thousand board feet for delivery in July.
The Wall Street Journal reports today that lumber futures have shown declines in 14 of the last 16 trading days (although futures remain nearly three times higher than typical for this period. period of the year). On Friday, the Random Lengths pricing service’s composite scoping index fell from $ 122 to $ 1,324, the largest drop on record in a week.
Some timber storers sell what they have hidden, which puts additional pressure on prices. As copper prices fall from record highs and steel prices fall in China, the economics of construction, or at least the conversation about it, may soon change significantly.