Skip to main content

For most of 2021, many Americans looking to buy a home have focused on soaring prices to build a home, with much attention paid to the cost of lumber and other building materials.

In late spring and early summer, lumber and plywood markets experienced a historic price spike that drove millions of buyers out of the market. As the Delta variant took hold across the country and many Americans took much-needed vacations, those markets went into freefall.

More around the house:The local housing market remains hot

sky high:Housing prices will remain high despite falling timber prices

The wood market correction unfolded from late June to mid-August, and during this period, wood markets fell nearly 67%, while siding markets fell 62%. With declines like this, builders and consumers assume housing prices should come down, but that’s not the case. In fact, home prices continue to rise as summer gives way to the downside in 2021, and that’s due to many factors.

First, historically low housing inventories and overwhelming demand are keeping home prices up. Many counties in Florida have less than 1-2 months of housing available, and while that has improved slightly over the spring, the markets simply don’t have enough housing available, especially affordable housing.

While lumber and siding prices fell from historic highs, the rest of the building supply chain continued to see price increases. COVID-19 delays persist at home and abroad, as many overseas markets remain in some form of lockdown, due to vaccine limitations.

Additionally, anything that uses steel or plastic has seen a spike in raw material costs, leading to monthly increases in things like steel doors and vinyl windows. Window delivery times remain excessive due to shortages of raw materials.

Farms also continue to experience excessive lead times with no improvement due to steel plate shortages. The steel shortage problem is beginning to negatively impact other items such as garage doors, masonry metals, and steel studs.

Building land is scarce and the cost of raw land continues to rise. Lot prices that were $10,000 to $15,000 five years ago now sell for three or four times that price.

Additionally, raw land development costs due to government regulations, along with higher land prices, drive up prices for similarly sized lots at $50,000 to $70,000. High costs of government regulations to develop land hinder affordable housing for the workforce.

The RoMac Building Supply Whole House Commodity Index bottomed out in August 2021 when it fell 24.6% from its June high, but in September this index rebounded 0.9%. The September index ended up 2.5% from a year earlier, when lumber prices were much higher. This indicates how much other parts of the supply chain actually affect the total price of a home.

What is the housing price forecast for the rest of 2021? After the index hit bottom in June, there is little doubt that house prices will not fall until December unless there is a black swan economic event.

Material prices will continue to rise and the supply chain will remain disrupted until the COVID-19 pandemic is resolved, and clearly low vaccination rates in America leave little hope of that happening. produce so soon.

Nothing has fundamentally changed in the housing market over the past few months. Inventories are low, demand is high, the supply chain is disrupted and raw materials in many sectors remain scarce.

Until a fundamental change occurs, there will be little chance that prices in the housing market will come down. If politicians in Washington DC start pumping money into housing, as expected, those markets could heat up.

If you’re sitting on the sidelines waiting for house prices to stabilize before buying, you may be on the sidelines for a while, especially if house prices rebound from this summer’s lows.

Don Magruder is the CEO of Ro-Mac Lumber & Supply, Inc., and he is also the host of the show “Around the House” which can be seen on AroundtheHouse.TV.