Home prices in the United States have recently hit record highs and many potential buyers are struggling to find and buy affordable properties. With a limited supply of housing, there is a lot of interest in building new properties.
Unfortunately, despite the housing shortage in the market, a recent report from the US Department of Commerce found that applications for building permits have fallen to their lowest level in seven months. Not only that, but the number of new homes being completed has also declined.
There’s a very good reason builders aren’t rushing to build properties despite the demand caused by the current shortage of existing homes for sale. Keep reading to learn more about labor and supply shortages and their impact on home building.
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How Labor and Material Shortages Affect New Home Construction
There are some big issues that are preventing a big increase in the construction of new homes.
One of the problems is that there is a significant labor shortage. Home builders are struggling to fill vacancies. Without crews to carry out the construction tasks, they cannot build new houses for people to live in.
There are also material shortages that have driven the prices of some key raw materials up dramatically. In particular, lumber prices are skyrocketing, with a record 154.3% year-over-year increase in softwood lumber cost in May according to producer price data .
Semiconductor shortages are also pushing up the prices of home appliances. And paint shortages, wiring shortages, copper shortages and tariffs on imported steel are also causing material prices to skyrocket.
With no affordable materials available for construction or without a sufficient number of workers to do the job, builders are in a tough spot. People want to build, but building is not necessarily a feasible or affordable solution.
And that’s why it probably won’t be surprising that a recent survey by the National Association on Home Builders showed that confidence among builders of single-family homes has fallen to its lowest level in 10 months.
Do your research before you build
Fortunately, the news is not all bad. The permits for future housing construction are still slightly higher than the number of houses that have already started to be built. This could suggest that more homes will be built in the next few months than is currently underway. But high supply costs are expected to persist for some time and will continue to make it more difficult for builders to take advantage of the competitive real estate market.
For those interested in building a home, the high demand for properties coupled with material and labor issues may make it much more expensive to build a home for the foreseeable future. Before embarking on construction, be sure to get detailed quotes from builders so that you understand the costs.
And make sure you don’t take out a bigger mortgage than you can easily afford just so you can build a house now during these unusual economic times.