The US is currently facing a historic shortage of homes for sale, which is why it’s surprising that homebuilders aren’t working as frequently as they once were towards the beginning of the pandemic. With the pandemic itself coming to a close, many Americans are continuing to look for work, and real estate prices and service fees have only increased for the same reason.
According to reports from NBC, single-family housing is priced 13% lower when compared to this time last year. This marks the sharpest decline since last April, when the pandemic initially shut down the economy.
“I have to blame the difficulty in procuring lumber and other products, along with labor issues for the miss, in addition to likely cancellations due to skyrocketing costs for single family starts,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.
According to a recent survey performed by the National Association of Home Builders, “prices of new and existing homes are at record levels, and the increases are accelerating at the fastest clip in over 15 years. Nearly half of all builders say they are adding escalation clauses to their sale prices because of rising material costs.”
“Escalation clauses specify that if building materials increase, by a certain percentage for example, the customer would be responsible for paying the higher cost. Including such a clause allows all parties to be on notice that the contract costs could change if materials prices change due to supply constraints outside the builder’s control,” according to the NAHB.
In a monthly sentiment survey, they also noted that “builders said they were slowing production in order to deal with higher costs for lumber, steel, gypsum and copper, some of which have hit record highs this year. A broad mix of residential construction materials is up in aggregate 12.4% over the previous 12 months.”
The NAHB claimed in their statement that lumber alone increased in price tremendously throughout the past year; specifically the group claimed the increase has added an additional $36,000 charge to every single-family home building cost.
The housing sector, like most of the industry, is also dealing with a major shortage in labor. Last April saw a major decrease in construction employment due to the fact that construction projects were some of the first to be halted when the pandemic began, leaving thousands of laborers unemployed or indefinitely furloughed.
“Contractors are experiencing unprecedented intensity and range of cost increases, supply-chain disruptions, and worker shortages that have kept firms from increasing their workforces. These challenges will make it difficult for contractors to rebound as the pandemic appears to wane,” said Ken Simonson, chief economist with Associated General Contractors of America, an industry trade group.
“Builders are also reporting difficulty obtaining other inputs like appliances. These supply-chain constraints are holding back a housing market that should otherwise be picking up speed, given the strong demand for buying fueled by an improving job market and low mortgage rates,” said Mike Fratantoni, chief economist for the Mortgage Bankers Association.
Eric Mastrota is a Contributing Editor at The National Digest based in New York. A graduate of SUNY New Paltz, he reports on world news, culture, and lifestyle. You can reach him at firstname.lastname@example.org.