More Buyers Look to the 'Burbs as Lumber Price Hikes Continue
The following analysis was recently published in NAHB's bi-weekly e-newsletter Eye On the Economy by Chief Economist Robert Dietz:
Lumber prices continue to climb as demand for new construction and remodeling remains solid. Since mid-April, the composite price of lumber, per Random Lengths, has increased by more than 150%. According to the most recent NAHB analysis, this is adding approximately $16,000 to the price of a typical, new single-family home and more than $6,000 to the average new apartment.
Beyond lumber, prices of several other building inputs continue to rise, and average delivery times for many are growing. Such constraints in the supply chain will slow the growth rate for single-family construction and remodeling in the coming months. The residential construction market needs additional domestic lumber production and tariff relief for Canadian imports.
Of course, the reason for these supply shortfalls is that housing remains in high demand. New home sales surged in July, increasing 14% and reaching a post-Great Recession high of 901,000 at a seasonally adjusted annual rate. Inventory fell to a lean four-month supply. New home prices are expected to rise due to increases in home size and building material costs. Similar trends were witnessed for the resale market, where the National Association of Realtors' pending home sales index increased almost 6% in July and was estimated to be more than 15% higher than a year ago. Home price growth has been strong, with the Case-Shiller Index up 5.5% year-over-year in July. Changing consumer preferences and a pivot away from high-density markets has led to relatively more growth in suburban markets. According to the second quarter NAHB Home Building Geography Index (HBGI), of the seven tracked regional geographies, only small metro area suburbs posted a year-over-year gain in this quarter, while the others registered declines, the biggest of which occurred in large metro core areas. The market share for single-family construction in low-density areas (small metro core and suburbs, small towns and rural markets) increased from 47.5% a year ago to 48.4%. Moreover, these trends are not just present in single-family construction. The fastest growing geographies for apartment construction in the second quarter were found in the exurbs, small metro suburbs and rural areas. The market share for multifamily construction in low-density areas increased from 32.9% a year ago to 34%. Macroeconomic risks remain for the housing market. Weekly jobless claims continue to exceed 1 million, and the unemployment rate is still above 10%. This labor market weakness in turn is feeding concerns about the ability of households to make rent payments in the fall, although thus far, the data have come in better than expected. But for the home building industry, the rising cost of materials will hinder the rate of improvement witnessed during an otherwise solid summer. To subscribe to the Eye on the Economy e-newsletter, email [email protected].Latest from NAHBNow
Sep 15, 2025
The Impact of the Professional Women in Building Leadership GrantProfessional Women in Building's annual scholarhsip programs provide students and emerging professionals with the resources, support and opportunities they need to thrive and lead the housing industry.
Sep 15, 2025
Associate Award Winners Share Meaning Behind Their WinNAHB is excited to award two of the association's top Associate contributors each year for their achievements. Two previous winners reflect on their experiences.
Latest Economic News
Sep 12, 2025
Household Real Estate Asset Values Reach New HighThe market value of household real estate assets rose to $49.3 trillion in the second quarter of 2025, according to the most recent release of U.S. Federal Reserve Z.1 Financial Accounts. The value rose by 2.7% from the first quarter and is 1.1% higher than a year ago. This measure of market value estimates the value of all owner-occupied real estate nationwide.
Sep 11, 2025
Parking Trends in Newly Completed Single-Family Homes, 2024In 2024, 65% of newly completed single-family homes featured two-car garages, according to NAHB’s analysis of the Census’s Survey of Construction data. The share of new homes with three or more car garages stood at 15%, continuing a downward trend from its peak of 24% in 2015 and decreasing 2 percentage points from 2023.
Sep 10, 2025
Year-over-Year Building Material Price Growth AdvancesPrice growth for residential building materials rose for the fourth straight month in August, reaching its highest level since January 2023. Across domestic inputs goods and services into residential construction, service prices decreased in August while goods prices slightly advanced.