Home Builders Are Starting To Feel The Supply Squeeze by Greg McKinney Mineola Texas
Well it’s finally starting to happen. We are seeing new home construction starting to slow. It’s not because there isn’t a demand but because the builders are having trouble getting materials and labor.
New home construction was down almost 10% in April compared to the previous month. But when you comparing that number to last April new home construction is up almost 70%. But everything came to a halt a year ago because of the virus.
So what actually going on. New construction on single family homes dropped by around 14% but we say an increase in multi-family units such as apartments and duplexes. New construction on multi-family units was up about 5%.
Most of the decline in new construction was seen in the Midwest and the South. The Western and Northern states saw a slight increase. In the rest of the country everything remained about the same as the previous month.
Lets look at what’s happening overall in the real estate market. Nothing has basically changed from March to April as far as home buyers are concerned. The pent-up demand from people being on lock down through a large part of 2020 has caused a flood of home buyers to hit the market and they are continuing to put pressure on low housing inventories. With the summer months coming we will be reaching a traditionally peak period of time for home buyers to hit the market looking for that new home. Many people like to wait for their kids to finish the school year before making the move. People also like to use some of their vacation time during the summer to transition into the new home.
Another number the experts look at is how many building permits were issued but construction did not start. That number shows builders are obtaining new permits but they are not starting construction on some of their projects.
The slow down was defiantly not expected by the experts. Almost everyone expected to see an increase in new construction. The downward trend in April was a surprise to everyone. Especially how sharp the pull back was in some areas of the country. The main reasons are a shortage of lumber and a shortage of labor. The supply of lumber just isn’t there as it has been in the past. In the fall of 2020 new construction started to increase and demand for lumber drastically increased. With the continued stimulus checks being received by workers many are electing to stay home instead of going to work which is slowing down construction projects across the country.
I do not believe we will see a huge decline in new construction for the rest of 2021. I do however believe we will continue to see a slowing until lumber prices decline. Some home buyers will start to wait to purchase that new home when lumber prices do start to drop hoping to save a little money on that new home which may be true. But with the lack of inventory will keep the market strong through the end of the year unless some unforeseen circumstance occurs. But with the building permits trending down we could be seeing a slowdown in new construction for at least the next few months. The slow down was defiantly not expected by the experts. Almost everyone expected to see an increase in new construction. The downward trend in April was a surprise to everyone. Especially how sharp the pull back was in some areas of the country. The main reason is a shortage of lumber and a shortage of labor. The supply of lumber just isn’t there as it has been in the past. In the fall of 2020 new construction started to increase and demand for lumber drastically increased. With the continued stimulus checks being received by workers many are electing to stay home instead of going to work which is slowing down construction projects across the country.
I do not believe we will see a huge decline in new construction for the rest of 2021. I do however believe we will continue to see a slowing until lumber prices decline. Some home buyers will start to wait to purchase that new home when lumber prices do start to drop hoping to save a little money on that new home which may be true. But with the lack of inventory will keep the market strong through the end of the year unless some unforeseen circumstance occurs. But with the building permits trending down we could be seeing a slowdown in new construction for at least the next few months.
Greg McKinney Mineola TX
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