Housing starts were up more than 22% in July from the previous report in June. According to the Commerce Department builders started 1.5 million new homes in the month of July. This is great news for potential buyers who will now have more inventory to choose from, however, home prices are also on the rise.
Raw materials used to build have had a huge spike in prices. Components that are made in China such as hammers, bathroom fixtures and nails have seen heavy tariffs. According to Mark Konter, a builder from Savannah, Georgia, he had to raise his home prices in July because of the cost of timber going through the roof. The higher cost of lumber will add $8,000 to $14,000 on the price of new homes to compensate for the difference.
“From July 1 to Aug. 1, we were up just shy of 45%, in that short, 30-day period alone,” Konter said.
Jerry Howard, head of the National Association of Home Builders blames the rise in timber cost to supply and demand. During the height of the pandemic supply of timber was down because the lumber mills had to close. The high demand for houses with the low inventory of timber caused the prices to skyrocket.
“I don’t think anyone anticipated housing to come back this strongly, placing this much pressure on the demand for all the components that go into a house,” Howard said.
This will not detour housing demand. Homebuyers are looking for larger homes where they can work from home and have space outside because of social distancing. Low-interest rates will help with the increase in home prices and as long as the interest rates stay low, homebuyers will keep purchasing.
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