House 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 great interest in the construction of new facilities.
Unfortunately, despite shortage of houses on the market, a recent report from the US Department of Commerce showed that the number of requests for building permits for houses fell to a seven-month low. Not only this, but the number of houses under construction in the new building also decreased.
There is a very good reason why builders have been slow to build properties despite the demand driven by the current shortage of existing homes for sale. Read on to learn more about labor and supply shortages and how they affect housing.
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How labor and material shortages are affecting new home construction
There are several serious problems that are preventing the large increase in new home construction.
One of the problems is an acute shortage of labor. Home builders are struggling to fill the open positions. Without teams performing construction work, they cannot build new houses for people to live in.
There is also a shortage of materials, which has caused the prices of some key raw materials to skyrocket. In particular, sawnwood prices are off the charts: the cost of softwood lumber in May rose by a record 154.3% year-on-year, based on producer price data.
Semiconductor shortages are also driving up the prices of household appliances. Lack of paint, shortage of wiring, shortage of copper, and tariffs on imported steel are also driving up material prices.
With no materials available for construction or enough workers to carry out the work, builders are in a difficult position. People want to build, but building is not necessarily a feasible or affordable solution.
And so it’s no surprise that a recent survey by the National Association of Home Builders found that confidence in single-family homebuilders fell to a 10-month low.
Study Before Build
Luckily, the news isn’t all bad. Building permits for houses in the future are still slightly higher than the number of houses already under construction. This could mean more homes will be built in the coming months than currently. But high supply costs are likely to persist for some time and will continue to discourage builders from taking advantage of the competitive housing market.
For people interested in building a home, the high demand for real estate, combined with materials and labor, is likely to make building a home much more expensive for the foreseeable future. Before starting construction, be sure to get detailed quotes from builders so that you understand the cost.
And make sure you don’t get it anymore mortgage loan than you can easily afford to build a home during these unusual times for the economy.