I don't know what the risk calculus is for these home developers, but I do know that in particular areas of the US, you just straight up cannot afford a home anymore on median income (or even the top 20%ers looking for fair pricing!).<p>I anticipate that mortgages will continue to push past 30 years into a strange 45-year+ territory, and we'll begin to see Japan-like multi-generational mortgages. Actually, in reality this is already happening, because people buying homes past the age of 37 (think retirement at 67, but these people are still working and trying to figure out estate handling late in the game) are passing on their mortgage to their children. I am personally seeing this with my friends. No headroom for paid off inheritances!<p>Alternatively, if the federal government does not prevent it from happening, residential REITs will buy them all up and force people to rent.
Has anyone looked at the cost of food or gas lately? Interest rates need to go up. It is beyond stupid that I was able to refinance my house at 1.75% on 15 year loan in December. My previous loan was 4% on a 30 which already was extremely low. It’s giving people free money who don’t need it. Side effect is the inflation that punishes the poor even more.
> Some builders have said they are slowing production in the face of exorbitant costs, but single-family housing starts were up 41% in March year over year, according to the U.S. Census. Builders are clearly trying to ramp up production as fast as they can to meet soaring demand.<p>For the next several months we'll be in a period of <i>base effects</i>. That means that year over year comparisons are going to look alarming.<p>Think back to what was happening one year ago. The economy almost completely shut down. Return to "normal" is going to give a lot of weird readings.<p>Articles like this should point this out, but don't. They should note, for example, the % drop in single-family housing starts YoY for 2020 for comparison.<p>The article hints at the phenomenon, but fails to actually quantify it. This leads to a more sensationalistic article that might attract eyeballs, but does a poor job of informing.
From what I've heard, this is mostly a function of...<p>1) Lumber mills shutting down because of weak demand and tariffs.<p><a href="https://www.woodworkingnetwork.com/news/woodworking-industry-news/two-new-canadian-lumber-mills-shut-down-hundreds-more-laid" rel="nofollow">https://www.woodworkingnetwork.com/news/woodworking-industry...</a><p>2) Curtailment of remaining production because of coronavirus<p><a href="https://www.woodworkingnetwork.com/news/canadian-news/coronavirus-forces-curtailments-three-major-canadian-lumber-mills" rel="nofollow">https://www.woodworkingnetwork.com/news/canadian-news/corona...</a><p>3) The housing market going a little nutty<p><a href="https://www.vox.com/22264268/covid-19-housing-insecurity-housing-prices-mortgage-rates-pandemic-zoning-supply-demand" rel="nofollow">https://www.vox.com/22264268/covid-19-housing-insecurity-hou...</a><p>4) I imagine record low interest rates also contributed
> Lumber tariffs had prices already rising a year ago, but then when the pandemic hit, production shut down. The expectation was that housing demand would dry up for a long time. But instead, after a brief pause, it came roaring back.<p>How can this be the case when lumber prices are surging in Canada as well? You'd expect that if the price was in response to tariffs then the origin country would be flooded with supply?
I wouldn't buy a house now if I could help it. It only seems reasonable because of extremely low rates. That is also the same thing driving equity valuations in our field to historically unusual levels. This is partially driven by market and partially driven by monetary policy, and it really can't go much lower than it is. Rate increases have a large increase on the present value of a mortgage of stock.
As the article notes, much lumber production shut down believing COVID would significantly impact demand, but that was really not the case except for a very short period of time.<p>In my area in particular, I live outside of a city hit hard by COVID, and that had lots of workers who could transition to WFH. The combination means that city dwellers have flocked to the local suburbs in <i>massive</i> quantities, often buying up the cheapest houses & either immediately expanding them or simply knocking them down completely to rebuild from scratch. As a result, not only is it difficult to find local contractors available for even minor home improvements, local property values have spiked as much as 30% over the last 14 months. This has been greatly assisted by mortgage interest rates that as incredibly low-- I just refinanced and saved about 20%/month on my mortgage and an overall $50,000 saving over the life of the loan.
A lot more builders should be looking into steel framing. Light gauge steel has also gone up, but nowhere near as much as lumber. For the typical project, it's probably cheaper now than wood framing. Especially when you take into account that steel framing can be pre-cut at a factory with CAD software, requiring much less skilled labor onsite.<p>And steel makes a <i>much</i> better frame. Fire resistant, termite free, mold free, holds up better in earthquakes and floods, stronger, doesn't rot, doesn't warp. The problem with the construction industry takes way too long to adapt new patterns, even long after shifting technology and economics makes it compelling.
I wonder how these prices factor into the regular inflation calculation.<p>Even last year, when I was buying lumber from Home Depot, they cancelled parts of my order, raised the price on certain items by almost 20% and never added them back.<p>I had to fight them for a week and it took over a month just to get a fairly modest amount of lumber delivered.
What's even crazier is that the builders are identifying that even with the increased price for lumber, demand is still there—people are willing to eat the cost. I don't imagine builders will be decreasing their prices after there being plenty of lumber supply.
My family moved into our newly built home in the northern suburbs of Pittsburgh in Oct. of last year. We were part of the first group of buyers in a relatively new plan of higher-end homes.<p>Since Oct. of last year, the base price of our model has gone up $215,000 and every lot in this phase (phase 1) has now sold. I suspect at least half of that increase is materials, and the rest is due to market demand.<p>The market is just crazy and in talking to my builder he has said supply shortages could last through EOY and into next.
Honest question: why are houses in the US primarily built with wood? Is it just because it’s cheaper?<p>Even if it’s cheaper, is it worth to have a cheaper but obviously less durable building when compared to brick and mortar?<p>It’s always been baffling for my southern European mind.
Gen-X: "We've got all this extra cash because we couldn't fly anywhere or go on cruises. Let's build our dream home in the mountains."<p>Boomer: "Well, the 401-K is up a ton. Can't seem to spend the cash pouring out. Let's upgrade the house and buy a second home somewhere nice."<p>Millenial: "We still have no savings because rent is insane and incomes have not kept up with inflation for decades as capital has played a larger role in growth than labour. We continue to have no long term security from a pension. I guess we'll just keep slaving away..."