Material Costs Affect Housing Affordability
The rising cost of building materials is harming housing affordability as the cost and limited supplies of softwood lumber, steel, aluminum and other imported materials and equipment exacerbate price volatility and drive up housing costs. The rising supply costs are exacerbated by the uncertainty of when supplies will be available to complete the home in a timely manner and whether or not the homes will appraise at the correct price to reflect these rising costs.
Housing has been an economic bright spot amid the COVID-19 pandemic, but the industry’s potential to lead the economy forward is limited as long as building materials remain expensive and scarce. Builders are doing everything possible to avoid pricing consumers out of homes while still maintaining competitive prices necessary to operate their businesses — especially given the potential long-term impacts on consumers.
Immediate impacts of rising costs include:
- A downturn in new home starts, as builders struggle to begin projects with uncertain time frames and costs,
- Construction delays, as the supply of materials remains unpredictable,
- Home owners walking away from the projects because of escalating projects costs, and
- Appraisals not reflecting the true value of the home, because costs are rising too rapidly and builders are having to compensate on the frontend of construction by decreasing amenities available in the home. Without proper appraisals, the builder and/or the home buyer are left trying to bridge the gap between what the appraiser says the home is worth and the actual sales price of the home. (To learn more about the different approaches to appraisals, and possible solutions, visit NAHB’s “Understanding Appraisal Approaches” page.)
The Commerce Department should be investigating why supplies from lumber producers and mills, and other materials sources are at such low levels.