NAHB: Lumber Shortages and Prices Hampering Affordability

In back-to-back
blog posts in the National Association of Home Builder’s (NAHB’s) Eye on Housing Blog, Paul Emrath details
both the extent of the current shortage of lumber facing homebuilders and its
impact on home prices. Emrath says that shortages of framing lumber are now
more widespread than at any time
since NAHB began consistently tracking it in1994
and that a large majority of builders seeing lumber prices specifically
affecting affordability.

conclusions grow out of results from special questions included in the April
and May NAHB/Wells Fargo Housing Market Index surveys.  Over 30 percent of single-family builders
responding to the May survey’s special questions reported a shortage of
framing lumber
, far more than reported shortages in any of the other 22
building products and materials listed. In second place were trusses, reported
as scarce by 24 percent of respondents, lightweight steel and OSB at 20 percent
each and plywood at 19 percent. In the last survey where these questions were
included, 21 percent reported framing lumber shortages and no other products
were cited by more than 15 percent of respondents.



Emrath said it is
probably no coincidence that numbers one through five on the shortage list are made
of either lumber or steel, both targeted with tariffs by the Trump Administration
in the last year. The last time framing lumber was named by nearly as many
builders as in short supply was in October 2004. Then 24 percent of builders
expressed concern, but that was in the midst of a housing boom when starts were
regularly exceeding 2 million units, compared to only about 1.3 million today.



The April survey
asked single-family builders if their prospective customers are holding back
from buying a home, and if so, why?  Twenty-one
percent said the question didn’t apply, they saw no buyer reluctance at the
moment. But 43 percent said construction costs in general are dampening
homebuying and over 90 percent of those respondents cited lumber prices
specifically as an affordability issue.



second reason customers may be holding back was that existing homes are more
.  Student loan debt was cited
by only a small number of builders despite how frequently it is mentioned by
others in the housing industry. The top
two reasons for buyers holding back as of April 2018 are related, of
course, as rising construction costs are a key reason existing home prices
are currently more competitive.



The increase in lumber prices is a
key reason for rising construction costs over the last 18 months, but a
shortage of labor and the costs of compliance with government regulations also
play a part.  Another question on the
April HMI asked builders if the increased costs were having an adverse impact
on the affordability of the homes they build and nearly all (95 percent) said
with most citing lumber prices. The 95 percent was evenly split on whether
the adverse impact was significant or minor.

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