By Leonard A. Robinson
U.S. home construction fell by 9.5% in April, according to U.S. Census Bureau data. New single-family housing construction declined by more than 13% from the month prior, an all-time pandemic low.
Meanwhile, building permit applications climbed by 0.3% in April to an annual rate of 1.76 million units, suggesting the decrease could be temporary. Apartment construction also rose by 4% to 470,000 units.
Economists and investors alike blame the rise in lumber prices, which added more than $30,000 to newly-built single-family homes this past year.
“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.
New and existing home prices remain at record high levels and are accelerating at the fastest rate in 15 years, CNBC reported. Lumber, steel, gypsum, and copper prices are at all-time highs as home builders feel the pinch of rising inflation.
Research has also confirmed that the construction industry is facing a labor shortage. A study from the Associated Builders and Contractors (ABC) released in March said the industry needs more than 400,000 workers to meet rising demand. The organization said it is working to recruit and educate the nation’s future construction workforce by investing $1.5 billion annually in workforce development initiatives.
“Now is the time to consider a career in construction, a vocation that offers competitive wages and ample opportunities to both begin and advance in an industry that builds the places where we work, play, worship, learn and heal,” said Michael Bellaman, ABC President and CEO.
A monthly sentiment survey released by the National Association of Home Builders (NAHB) showed that builders have a positive outlook for the future despite currently slowing down production. Builder sentiment was at 80 on a scale where anything above 50 is positive, up from 37 this time last year. The survey showed strong results in sentiments surrounding demand, sales expectations, and buyer traffic.
Builders said that first-time homeowners, who typically built less expensive homes, are the most at risk for losing out due to rising costs.
“First-time and first-generation homebuyers are particularly at risk for losing a purchase due to cost hikes associated with increasingly secure materials availability,” said Chuck Fowler, NAHB chairman.
Consumers should expect to see rising home-building costs throughout 2021 as producers shift their price increases to customers, said Robert Dietz, NAHB’s chief economist.