LOS ANGELES (AP) – U.S. home builders are poised to make the most of this spring’s home-buying season amid high demand, low mortgage rates and an all-time low inventory of homes for sale. But rising timber prices and a shortage of ready-to-eat land may limit their ability to capitalize on strong housing market trends, analysts say.
The price of timber has more than doubled in the last year, reaching all-time highs, reflecting the high demand for new construction, the epidemic problems that limit production.
The sharp rise in the cost of timber, among other building materials, is of concern to builders as it increases costs, possibly reducing the number of potential buyers who can afford to buy a home.
Builders are also struggling with the reduction of developed land or land ready for construction.
Zonda Economics chief economist Ali Wolf predicts that new home sales in the United States will grow by 5% compared to 2020. It will be a much slower growth rate than last year’s almost 20% jump from 2019.
“Supply is a limiting factor,” Wolf said. “If the builders had more houses to sell, the sales would be bigger.”
Robert Ditz, chief economist at the National Association of Home Builders, did not make a forecast, but he expects sales to grow at a slower pace, despite a strong overall housing market.
“The housing market will grow in 2021, but the growth rate itself will be lower than we felt in 2020, due to the fact that the availability of these apartments is turning into timber, lack of lots, this is more binding. years, “Ditz said.
The housing market returned strongly last summer after a coronavirus outbreak in the spring after a sharp drop. According to the National Association of Real Estate Agents, sales of U.S. homes seized last year rose to their highest level since 2006, at the height of the housing boom.
At the same time, according to the Department of Commerce, sales of new homes in 2020 increased by 19% compared to the previous year. Sales of new homes rose 4.3% last month.
Several market trends are in high demand for home ownership. Mortgage rates remain at an all-time low. Americans forced to work from home during the epidemic are looking for bigger homes. And more millennia are entering the market.
Other trends, including the all-time low inventory of 1.04 million resale homes (less than two months’ supply), should pave the way for home builders to enjoy a working year. But those prospects have been overshadowed by restrictions on the supply of industrial land and building materials.
“You’ll see housing begin to grow, sales will grow more slowly than they could if we did not have those problems with land availability, materials,” said Carl Reichard, a BTIG housing analyst.
Although the prices of timber, cement and other construction materials fluctuate constantly, instability has worsened over the past year as the coronavirus epidemic has led to plant closures, a shortage of trucks and other logistical problems that have made the normal smooth supply chain unpredictable. This means a shortage of items such as windows, faucets, which means higher costs, and construction projects have been delayed.
The epidemic has also left some municipalities short-lived, which could mean delays in obtaining building permits, inspections or the process of clearing land for new construction.
For builders who have to deal with such obstacles, this means more delays, uncertainty, difficulties in completing the house on time, on a budget.
The rise in timber prices, which many mills were operating at less than full capacity due to the epidemic, was of particular concern to builders. A key building material used to build new homes, it has been torn since April. It traded at $ 1,018.10 a barrel on Tuesday, just below the all-time high set a day earlier, according to FactSet.
This wave of timber has added more than $ 24,000 to the average new single home price, says Ditz.
“Prices are rising, it takes more time for the materials to arrive, it is especially acute in the timber market,” he said.
Finding land is a bigger problem for some builders.
Many builders used their own supply of ready-to-build plots much faster last year than expected to meet high demand. And some stopped buying land altogether weeks after the outbreak, with the goal of limiting spending amid uncertainty over housing recovery.
“The housing market was hotter than we all expected,” Wolf said. “And the builders and developers burned much sooner than expected.”
The number of available lots for the construction of new homes has been steadily falling for years, reaching 630,800 last year, according to Zonda Economics. This is less than 731,689 5 years ago. Raw soil can take a year or more to remove obstacles to the development of new homes.
Demand for timber and other construction materials has helped boost the shares of companies supplying the construction industry. Weyerhaeuser, Rayonier, PotlatchDeltic grew by more than 26% and Builders FirstSource by 66.3%.
Reichard says home builders who have enough land to keep growing their orders – their earnings – will probably have a better year than those who have sold their land.
She has a “Buy” rating at DR Horton, Lennar, PulteGroup և Taylor Morrison Home.