The US housing market has been a source of strength to the US economy during the COVID-19 pandemic. Demand for housing has remained strong as people – especially those fleeing urban areas hit hard by the coronavirus – continue to seek out homes in suburban and exurban areas. On the supply side, homebuilding continued at a healthy pace in most areas of the US, as most states and localities allowed construction work to progress.
However, for those in the industry who expected 2021 to be something of a smoother ride, the reality has been anything but, as the US housing market faces a number of challenges that can hamstring continuing growth.
First, home prices – which have remained high due to strong demand – are continuing to climb, threatening to price potential buyers out of properties. A shortage of existing homes available for sale as well as the rapid sale of a residence once it has been placed on the market, has pushed up the price of homes. This trend does not show any signs of abating soon, which would offer an opportunity to new home builders.
However, home builders are also facing crises. First, lumber and engineered wood product prices are also rising. Mills have been unable to meet the high demand for building materials, leading to shortages that have added thousands of dollars to new home prices, making them less affordable to buyers on the lower end of the market.
Furthermore, home builders must face shortages of building materials due to issues in the supply chain. Surging imports of a wide range of products have led to backlogs at the nation’s ports. Cargo ships take more time to be emptied, freight specialists have trouble finding space for off-loaded goods, and shortages of containers mean that products, even if available, cannot be transported to customers inland. All of these factors add to the cost of building a new home and delay their completion – frustrating builders, contractors, and buyers alike.
Freedonia Group experts will continue to monitor lumber prices, housing availability, and the supply chain to determine their effect on not only the construction market, but other segments of the US economy. For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly in the Construction and Building Products. Freedonia also offers an expanding catalog of COVID-19 Economic Impact reports, which highlight how various industries are responding to the current crisis with a comparison to recent recessions. Freedonia Custom Research is also available for questions requiring tailored market intelligence.