Homebuilding in the United States tumbled as a whole in September, according to the latest data from the Commerce Department. Housing starts and permits for future home building both declined unexpectedly as a result of continuous labor and material shortages. These shortages have already impacted the housing market and the economy. This latest monthly fall in new homes being built could also impact both, if it continues for the rest of the year.
According to the new data from the Commerce Department, housing starts dropped by about 1.6% in September. Meanwhile, permits for future home building also fell by about 7.7%. Previously, analysts forecasted a rise in starts — so this drop is definitely unexpected.
This latest tumble in housing starts and permits for future home building is likely a result of many factors at play. Lumber prices are still a huge issue for homebuilders. The price of lumber skyrocketed, and for many months now homebuilders have slowed down their intake of new projects as a result of this high price. Now, lumber prices have fallen quite a bit in the past few months. However, this lower price has yet to actually hit homebuilders in the United States — thereby lumber prices are still a problem for many.
Material shortages are likely also to blame for the tumble in homebuilding. Many materials are in short supply, such as windows and electric breaker boxes. These materials are in short supply for many reasons, though one of the main factors has to do with the global supply chain problems gripping the entire world. As a result of the COVID-19 pandemic, the global supply chain has fallen behind, and now many ports in the United States and around the world are clogged. This has also caused prices for shipping containers — and items on the shelves — to surge in price.
Lastly, this fall in homebuilding may also have to do with labor shortages. Homebuilding companies, just as with so many other industries, have been working with drastic labor shortages that have slowed down their overall progress on how many new housing projects they can take on — and when this project will be completed.
While this tumble in homebuilding activity was unexpected, confidence in homebuilders is still rising, according to a survey from the National Association of Home Builders. While high, it is understood that homebuilders still have a lot of problems they have to work through, which may continue to impact their business in many ways.
For months now, many analysts have been saying that the surge in home prices is keeping first-time buyers out of the housing market. The price of homes has yet to go down, and now it may appear that inflation may keep lifting the price of mortgage rates. This increase in rates could also keep homeowners from buying for the first time.
There’s already a short supply of homes on the market — which is one of the reasons why it’s so costly to buy right now. If new homes are not being built fast enough for consumer demand, costs may continue to surge as a result of low supply.