Relief May Come Soon on New-Home Prices, Builders Say

November 10, 2020 | Comments Off on Relief May Come Soon on New-Home Prices, Builders Say

November 4, 2020

Rising lumber prices have been pushing up the cost of new homes, but relief could be on the way, according to a new report from Zonda, the research firm formerly known as Meyers Research.

Lumber futures are showing signs of falling, say builders recently surveyed by Zonda. That suggests prices could moderate in the coming months. So far, the impact of falling prices hasn’t been evident. Fifty-six percent of builders say they have not seen prices cool yet on lumber, but they acknowledged that there can be a lag of a month or two.

Ninety percent of builders reported raising their base prices in mid-October compared to mid-September. Fifty-seven percent of builders reported raising prices by $3,000 and $5,000.

The National Association of Home Builders has said that record-high lumber prices have driven up new-home prices over recent months. The recent spikes have added more than $16,000 to the typical cost of a new single-family home since April, the NAHB says.

As prices rise quickly in the new-home sector, appraisals are becoming a bigger issue, according to the report released by Ali Wolf, Zonda’s chief economist. Forty-two percent of builders in October said their new homes are not achieving high enough appraisal values. That is a considerably higher percentage of builders reporting low appraisals in October compared with September, when just 28% of builders reported low appraisals.

Overall, however, the biggest concerns for builders heading into 2021 likely will be lot shortages, land prices, new-home affordability, the aftermath of the election, and building material costs.

“We should expect to continue seeing an elongated time from start to completion of new homes going into 2021,” Wolf says in the report. Fifty-seven percent of builders foresee supply disruptions and 29% predict labor shortages will continue to press on timelines.

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