The shortage of labor and rising costs of materials is deterring builders from moving forward with developments, despite economic conditions and demand growing.
“Single-family permits have inched up slowly as builders continue to face supply-side headwinds such as ongoing price hikes in building materials, a lack of buildable lots and labor shortages,” said NAHB Chief Economist Robert Dietz.
The issue may be worsened if the Department of Commerce goes ahead with its proposal to charge a 20% tariff on lumber imports from Canada, something the building sector is actively lobbying against.
The National Association of Home Builders / First American Leading Markets Index has hit a new milestone with markets across the nation reaching 100% normal economic conditions but the individual components reveal disparity in the sector.
While employment is at 98% and home prices are 150% of normal activity, permits for single-family homes are at just 53%.
“This is the first time the LMI has reached this key milestone and it shows how much our industry has improved since the depth of the Great Recession,” said NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas.
“However, we are concerned that single-family permits continue to trail the other components of the LMI and remain at only halfway back to normal.”
The LMI shows that 183 of around 340 metros are at or near their normal levels of economic and housing activity, a net gain of 67 markets compared to a year ago.
More market update:
Tight supply in markets across the US is being exacerbated by low intentions for building new single-family homes.