27 Apr Breaking down the new housing market
Dealing with the pandemic over the past year has been tough on the entire country. We have been fortunate in Indiana, however, to have strong leadership at the state level that has allowed us to weather the pandemic in much better shape from a health and economic standpoint. The construction industry was deemed “essential” from the start by Governor Holcomb, allowing our industry to continue to be a bright spot in our economy.
Amidst a pandemic, single family housing starts increased 15% in Indiana in 2020 compared to 2019. We have consistently outperformed our neighboring states for new starts month after month, and housing demand continues to be strong in most areas of the state.
However, current strong demand for housing comes with its challenges. Lumber prices have skyrocketed more than 180% since last spring due, largely, to insufficient domestic production. This price spike has caused the price of an average new single-family home to increase by more than $24,000 since April of last year. Rising interest rates, supply shortages, and rising material prices, particularly for lumber, threaten to put a damper on new home sales. Sales of newly built, single-family homes in February fell 18.2% to a 775,000 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. This is the lowest since last May on a national basis.
From the onset, the pandemic was a perfect storm for surging lumber prices. At the same time that sawmills were limiting production during the early months of the crisis, the stay-at-home orders were leaving homeowners with ample time to work on their home improvement projects. Record low interest rates and a severe lack in existing real estate inventory caused many buyers to turn to new construction options, further exacerbating an already tight lumber supply.
The industry faces challenging times. Meeting the demands of the home buying public with sky-rocketing lumber costs, and shortages and/or delays of other building products that go into houses makes delivering a house in a timely manner at a price buyers can afford is difficult. Not to mention the appraisal issue with new construction. There is no “one size fits all” approach to dealing with these challenges, but NAHB and IBA are working hard to keep the membership abreast of any new developments on all of the above mentioned issues.
I am encouraged by the resiliency of our membership to continue to bring product to the market and always fighting for their customer, the homebuyer. Pushing back on regulatory costs, fee increases and other hidden costs to housing is what your association is here for. We’ll continue to fight to make sure housing remains affordable and achievable in Indiana.
You can make your voice heard by participating in NAHB’s Bringing Housing Home Campaign May 3-7. This is a great opportunity for you to team up with your local HBA and advocate for housing’s legislative priorities at in-district meetings with your members of Congress. Please contact your local executive officer or the state office for more details.