NAHB Now Have Building Material Prices

HAVE BUILDING MATERIAL

Prices Peaked?

In just the past year, prices for materials used in residentialb construction have climbed nearly 20%. But that was also a period of intense demand and insufficient supply — a reliable recipe for sky-high prices. So, with interest rates rising at their fastest pace in decades, housing demand is already beginning to ease. But will that mean material prices are on their way down as well? If the mercurial fall in framing lumber prices in recent months is any indication (currently down 48% compared to one year ago), other materials are also likely to see prices flatten and drop as demand slows. Steel mill products and ready-mix concrete are prime examples: Steel mill products have increased 105.6% since January 2021 but have declined 3.1% thus far in 2022. And prices for ready-mix concrete are up 12% from the start of 2021 but have only increased 3.2% since the beginning of 2022. However, NAHB Chief Economist Robert Dietz asserts that broader and more significant price declines for building materials will require more beyond the Federal Reserve’s strategy of rising interest rates. "I do think the Fed should explicitly acknowledge the role fiscal, trade and regulatory policy is having on the economy and inflation," Dietz said in a recent Eye on Housing article. "Higher interest rates will not produce more lumber, [and] smaller balance sheets will not increase the production of appliances and materials," he wrote. "In short, while the Fed can cool the demand-side of the economy (reducing inflation and growth), additional output on the supply-side is required in order to tame the growth in costs that we see in housing and other sectors of the economy." Thus far, any price-growth declines in building materials have been predominantly the result of a drop in buyer demand. Further evidence of this has continually appeared throughout 2022 within each reading of the NAHB/Wells Fargo Housing Market Index (HMI) of builder sentiment. The HMI declined for the sixth straight month in June, falling to a level of sixty-seven and indicating a growing number of builders are either experiencing or anticipating a slowdown in prospective buyer traffic. "On the demand side of the market, the increase for mortgage rates for the first half of 2022 has priced out a significant number of prospective home buyers," Dietz said. "Consequently, the market has now passed an inflection point whereby single-family home building is weakening, [and] we expect further declines in the months ahead."

Continue the conversation: • The Impact of Today's

Home Building

Challenges on

Homeownership

BY: DAVID LOGAN

• NAHB Chairman Jerry Konter participates in a panel at the

National Housing Conference's "Catalysts for Change: Reducing the Racial Homeownership Gap" event. • NAHB Chairman Jerry Konter joined thought leaders from across the housing industry to discuss critical challenges facing housing and homeownership as part of the “Catalysts for Change:

Reducing the Racial Homeownership Gap” event co-hosted by the Urban Institute and the National Housing Conference. • Panels at the event included discussions of vertical and horizontal alignment of federal programs and resources, and best practices for closing the homeownership gap from local stakeholders. Konter participated in a component that focused specifically on federal interventions in homeownership disparities and used the opportunity to highlight key factors keeping homeownership out of reach for many, including continuing challenges with supply-chain constraints and material prices, lack of labor to build more homes and overregulation. • “Government regulations and impact fees add roughly 24% to the cost of a typical new home. That has a huge impact on affordability,” Konter stated. “Home builders support the intent of most regulations — such as a clean environment, safe working conditions, and desirable and resilient communities. But we desperately need lawmakers and regulators to understand that when you overlap thousands of regulations at the local, state and federal levels, that slows production and drives up costs.” • Konter also reiterated NAHB's interest in removing tariffs on

Canadian lumber, after expressing extreme disappointment last week for the Biden administration's inaction on this issue. • “It is particularly important to end tariffs on Canadian lumber shipments into the U.S. that are further fueling lumber price volatility and acting as a tax on American home buyers,” he noted, adding that an increase of domestic timber harvesting would also be beneficial. • Fellow panelists included Daniel Hornung, Special Assistant for Economic Policy to President Biden; Luis C. Padilla, president of the National Association of Hispanic Real Estate

Professionals; Lisa Rice, president and CEO of the National Fair

Housing Alliance; and Vanessa Perry, a professor at the George

Washington University School of Business and non-resident fellow at the Urban Institute’s Housing Finance Policy Center. • Learn more about housing affordability challenges on nahb.org.