The housing market is on fire, but the same can’t be said for home building.
Although housing starts are up, building permits — an indicator of future construction — declined last month to 100,000 below the six-month average, according to data released Tuesday, CNBC reported. They are now at their lowest point since last August.
Meanwhile, mortgage applications for newly built houses were down 24 percent from last June, per the Mortgage Bankers Association. It was the third straight month of decline.
Builders are struggling to maintain low price points for families who need them. The cost of key building materials is on the rise, as are regulatory costs. Additionally, labor shortages persist in construction, as they do in other industries.
With demand for new homes — which began surging during the pandemic — outpacing supply, home prices have shot up. The median sale price of a new home was 18 percent higher in May 2021 than a year earlier. Buyers looking for cheaper homes are being priced straight out of the market.
One potential bright spot for home builders is that the cost of lumber is finally dropping after a record increase. But they do not appear inclined to pass any of those savings along to buyers.
[CNBC] — Holden Walter-Warner