Page 4 Friday, February 26, 2021
THE GARDEN ISLAND
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DEMAND STRONG, SUPPLIES LOW Builders grapple with land shortage, soaring lumber costs Alex Veiga ASSOCIATED PRESS
Long-term mortgage rates rise; 30-year average at 2.97% ASSOCIATED PRESS WASHINGTON — U.S. long-term mortgage rates rose this week but remain near historic lows as the pandemic-hobbled economy strains toward recovery with more Americans getting vaccinated against the coronavirus. Mortgage buyer Freddie Mac reported Thursday that the average rate on the benchmark 30-year fixed-rate home loan increased to 2.97% from 2.81% last week. By contrast, the benchmark rate stood at 3.45% a year ago. The average rate on 15-year fixed-rate loans, popular among those seeking to refinance their mortgages, rose to 2.34% from 2.21% last week. While economists expect modest increases in home-loan rates this year, they likely will remain low while the Federal Reserve keeps interest rates near zero until the economy recovers. The record-low lending rates have helped push buyers into the housing market. The government reported Wednesday that demand for new homes surged 4.3% in January, confirming that the housing market remains one of the stronger sectors of the U.S. economy. But the lack of supply of homes, which was pushing up prices even before the pandemic struck last March, has left many prospective buyers empty-handed.
US existing home sales, and prices, rise again in January ASSOCIATED PRESS Sales of previously occupied U.S. homes rose again last month, a sign that the housing market’s strong momentum from 2020 may be carrying over into this year. Existing U.S. home sales rose 0.6% in January from the previous month to a seasonally-adjusted rate of 6.69 million annualized units, the National Association of Realtors said Friday. Sales jumped 23.7% from a year earlier. It was the strongest sales pace since October and the second highest since 2006. Home prices also rose. The U.S. median home price was $303,900 in January, an increase of 14.1% from a year earlier. Prices increased in every region of the country. The red-hot housing market has left the number of available properties for sale at record lows. The dearth of homes for sale has been the main driver of home prices. “Sales easily could have been even 20% higher if there had been more inventory and more choices,” said Lawrence Yun, NAR’s chief economist. At the end of January, there were an all-time low 1.04 million homes for sale nationally, down 1.9% from December and 26% from January 2020, NAR said. At the current sales pace, that amounts to a 1.9 months’ supply, down from a 3.1 months’ supply in January 2020. Underscoring how competitive the housing market was last month, 71% of homes sold in January had been on the market for less than a month. And properties were typically snapped up in 21 days for the fifth straight month, NAR said.
LOS ANGELES — U.S. homebuilders are poised to benefit this spring homebuying season amid strong demand, low mortgage rates and an all-time low inventory of previously occupied homes for sale. But soaring lumber prices and a shortage of construction-ready land could limit their ability to capitalize on the strong housing market trends, analysts say. The price of lumber more than doubled over the last year to an all-time high, reflecting strong demand for new construction and home remodeling, and pandemic-related problems limiting production. The sharp rise in the cost of lumber, among other building materials, is a concern to builders because it drives up costs, potentially shrinking the pool of would-be buyers who can afford to purchase a home. Builders are also grappling with a shrinking supply of developed lots, or land that’s ready for construction. Ali Wolf, chief economist at housing market data tracker Zonda Economics, forecasts that new U.S. home sales will rise 5% this year over 2020. That would be a far slower pace of growth than the nearly 20% jump last year from 2019. “Supply is the limiting factor,” Wolf said. “If builders had more homes to sell, sales would be higher.”
MARK J. TERRILL / ASSOCIATED PRESS
A sign sits in front of a KB Home construction site, in Simi Valley, Calif. Robert Dietz, the National Association of Home Builders’ chief economist, hasn’t issued a forecast, but also expects sales to grow at a slower pace, despite an overall strong housing market. “The homebuilding market is going to grow in 2021, but the growth rate itself is going to be lower than what we experienced in 2020, due to the fact that these housing affordability headwinds like lumber, a lack of lots, are becoming more binding this year,” Dietz said. The housing market mounted a strong comeback last summer after declining sharply in the spring when the coronavirus outbreak hit. Sales of previously occupied U.S. homes surged last year to the highest level since 2006 at the height of the housing boom, according to the National Association of Realtors. Sales of new homes, mean-
while, jumped 19% in 2020 over the previous year, according to the Commerce Department. New home sales climbed a further 4.3% last month. Several market trends are driving strong demand for homeownership. Mortgage rates remain at historic lows. Americans forced to work from home in the pandemic are seeking larger homes. And more millennials are entering the market. Other trends, including an alltime low inventory of resale homes of 1.04 million (less than two months’ supply), should pave the way for homebuilders to enjoy a banner year. But those prospects have dimmed amid the industry’s land and building supplies constraints. “You’ll see (housing) starts and sales grow more slowly than they could if we didn’t have these issues with availability of
land and availability of materials,” said Carl Reichardt, a BTIG homebuilding analyst. While the price of lumber, cement and other construction materials fluctuate constantly, the volatility has worsened over the past year as the coronavirus pandemic led to factory closures, a shortage of truckers and other logistical issues that have made the normally smooth supply chain unpredictable. That’s meant shortages in items like windows and faucets, translating to higher costs and delayed construction projects. The pandemic has also left some municipalities shorthanded, which can mean delays in approving building permits, inspections or the process needed to get land cleared for new construction. For builders having to deal with such obstacles, this means more delays, uncertainty and difficulty in getting a home completed on time and on budget. The rise in lumber prices, a consequence of many mills running at less than full capacity due to the pandemic, has been particularly worrisome for builders. A key building material used in framing new homes, it has been on a tear since April. It settled Tuesday at $1,018.10 per thousand board feet, just below the all-time high it set a day earlier, according to FactSet. This surge in lumber has added more than $24,000 to the price of an average new single-family home, Dietz said. “Costs are going up, it’s taking longer for materials to arrive, and it’s particularly acute in the lumber market,” he said.
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