The Housing Market is Still Going Strong!
The price of lumber has fallen, but price relief is still a ways away!
I have read a few articles recently detailing the falling price of lumber and the return to pre-pandemic price levels. As a typical consumer, my first inclination is to assume the cost of housing should start to come down. This couldn’t be any further from the truth. Demand is still robust out there for houses and lumber. A decrease in demand or an increase in supply will have to be prolonged before we see price reductions downstream.
I recently visited a housing construction site and perused a few homes. One of the Sales Consultants made a valid point representing many industries. Even though today’s prices of lumber have fallen, the builders are still working with lumber purchased at a higher dollar value. That inventory has to be worked through before they are going to pass on any savings. Again, savings will not be passed on until demand starts to fall, and the low amount of available homes dictates the high need.
Believe it or not, home sales have continued to fall over the last few months, and everything points to a low inventory of houses and rising mortgage rates. With the average selling price of a home fast approaching $400,000, we are starting to see the limit to what the consumer can afford. So why is demand still high? Every indication is the market is still in a deficit of available housing by roughly 4,000,000 homes. As reported by Fortune Magazine, demographics are a significant cause of this deficit.
We’re still amid the five-year window (between 2019 and 2023) when every millennial born in the generation’s five largest birth years (between 1989 and 1993) will hit the all-important first-time homebuying age of 30.
Expect pricing to remain high for the foreseeable future as we are still in a “Sellers” market. It is one of the reasons we have started to see consumers opt to renovate their current homes. I have a friend who was looking to upsize his home and was involved in several “bidding wars” when seeking out a larger home. He has since opted to renovate his current home until the market stabilizes. It will be interesting to see how the rest of 2022 plays out!