Everyone wants to build a house these days, but good luck finding something to build it with.
Homebuilders started 9.5% fewer homes in April than they did in March, with an even steeper decline—13.4%—for single-family homes, according to Tuesday’s monthly report on housing starts from the U.S. Census Bureau. Building permits, however, rose 0.3%, leading economists to conclude that the desire to build houses is still strong but is being hindered by shortages and high costs for materials.
- The high-flying homebuilding industry is falling back to earth, starting 9.5% fewer new houses in April than in March, the U.S. Census Bureau said.
- Economists and homebuilders blamed the decline on shortages of everything from wood and concrete to pipes and paint, which has driven up costs and caused delays.
- The skyrocketing cost of lumber is a major culprit in the slowdown.
House construction has been booming lately as buyers, whose wallets have been bolstered by low interest rates for mortgages, turn to homebuilders to remedy a severe shortage of houses on the market. But Tuesday's report suggests the hot residential real estate sector has not escaped unscathed from shortages of supplies and even labor that have hindered the broader economic rebound from the pandemic. Homebuilders and economists said the high prices were starting to hurt business.
“Even if I had 100 signed contracts today, I couldn’t start all those due to material availability,” said Steve Martinez, owner of Tradewinds General Contracting in Boise, Idaho. “We are seeing shortages or rationing going on in the marketplace.”
Lumber, concrete, wood products made with glue, pipes, and plumbing supplies are all in short supply, Martinez said. Not to mention, those soaring lumber prices are adding so much to the cost of houses, they are driving buyers out of the market, he said. And that’s not just an Idaho problem.
'Only So Much' People Can Afford
“I think people are going to start canceling contracts,” said Mike Cogdill, owner of Cogdill Builders, a home construction company in Tampa, Florida. “Even though we have low interest rates, there’s only so much people can afford. Everybody has a budget.”
Cogdill said he recently quoted a customer $100,000 in lumber costs for a 3,200-square-foot house, when the same wood would have previously cost $25,000 to $30,000. He is also facing weeks-long delays for appliances, concrete blocks, trusses, and other supplies. Even house paint is evidently harder to get these days, at least in Dallas, where one painter said he had to go to 10 different stores to find the paint he needed.
“I had to buy all of my paint ahead of time in order to keep my jobs going,” said Jorge, the painter, who did not want to give his last name.
The high costs and shortages are indeed forcing builders to postpone projects and pricing buyers out of the market, according to the National Association of Home Builders, which has been lobbying the government to step in and address the supply issues, and the Mortgage Bankers Association.
“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, the mortgage trade group's chief economist, in a commentary.