Home prices continue to skyrocket and there seem to be very few speed bumps out there that can slow down price appreciation.
On Thursday, The National Association Realtors said that the national median existing single-family home price rose 14.9% on a year-over-year basis, to $315,900. These price increases are almost caused exclusively by record low levels of inventory.
New data from Redfin highlights the impact low inventory is having on prices. On Friday, Redfin reported that 55.9% of “offers for homes faced bidding wars in January, up from a revised rate of 52.5% in December. It marks the ninth consecutive month in which more than half of home offers written by Redfin agents faced competition.”
The good news is the Census Bureau reported in late January that construction starts jumped in December especially for single-family, “Single-family homebuilding, the largest share of the housing market, soared 12.0%”
The bad news is on the multi-family front. Not only is multi-family down year-over according to the latest census data, but 2021 is not looking hopeful. Robert Dietz, NAHB Chief Economist, said in a statement that the sector is facing stiff headwinds, “Shortages and delays in obtaining building materials, rising lumber and OSB prices, labor shortages and a more ominous regulatory climate will aggravate affordability woes and delay delivery times.”
Complicating matter more is the inflating costs of new construction. Lumber prices are skyrocketing. The price of lumber hit a record high last week and is up more than 170% over the past 10 months. The NAHB is now asking President Biden for help. NAHB Chairman Chuck Fowke, said in a statement, “NAHB is urging President Biden and Congress to help mitigate this growing threat to housing and the economy by urging domestic lumber producers to ramp up production to ease growing shortages and to make it a priority to end tariffs on Canadian lumber shipments into the U.S. that are exacerbating unprecedented price volatility in the lumber market.”
Housing affordability is becoming a bigger issue every week. Even with raising rates, a stabilizing and growing economy could entice more people to buy. With demand unlikely to fall significantly the only solution is on the supply side. Build, baby, build. Even with higher lumber costs.