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October Wrap-Up Construction Insider: Rise in home construction, higher builder confidence & more

October Wrap-Up Construction Insider: Rise in home construction, higher builder confidence & more

November 2, 2020

Construction Insider is a monthly roundup of the latest news and insights in construction.

US home construction rose by 1.9% in September

US residential construction improved by 1.9% in September, totaling a seasonally adjusted rate of 1.42 million homes and apartments, according to a report by the Commerce Department. AP

  • The improvement followed a 6.7% drop in August.
  • Single-family home construction was also able to offset a 14.7% drop in August after a 7.8% surge in September.
  • Building permit applications, meanwhile, increased by 5.2% to 1.55 million units, suggesting that there will be more construction activity in the future.
  • “Strong demand, low inventory and a record level of homebuilder confidence continue to support new home construction,” said Nancy Vanden Houten of Oxford Economics, as reported by AP.

Builder confidence continued to improve in October

Homebuilder confidence for the newly built single-family home market increased by 2 points to 85 in October, according to the most recent NAHB/Wells Fargo Housing Market Index (HMI). LBM

  • Record-low interest rates are behind the strong demand for single-family homes, according to NAHB Chairman Chuck Fowke.
  • The challenges remain for building affordable homes as there is still a continuous shortage in labor, lots, lumber, and other construction materials.
  • Still, the housing market remains to be a “bright spot for the economy,” said NAHB Chief Economist Robert Dietz. He added that there is an increase in buyer interest in the suburbs, exurbs, and small towns.

Construction employment increases in residential sector

New construction jobs were added in September, but the slight increase in construction employment was mostly observed in the housing sector. KHL

  • Construction jobs rose by 26,000 jobs to a total of 7,245,000, and the majority of these were for residential construction, according to the Associated General Contractors of America (AGC).
  • While the ongoing pandemic has resulted in a surge of demand in housing construction, the same improvement may not be observed in private-sector development.
  • “Construction is becoming steadily more split between a robust residential component and generally stagnant private nonresidential and public construction activity,” said AGC Chief Economist Ken Simonson.

Lumber prices start to trend downward

Following a peak of over $950 per thousand board feet, lumber prices have since started to go on a slow but downward trend. NAHBNow

  • Lumber prices recorded in the week of October 16 were at over $750 per thousand board feet, and were around $200 less than the reported peak in September.
  • The decline in lumber prices coincided with the National Home Builders Association’s appeal for President Donald Trump and other federal officials to address the soaring lumber prices that were affecting not only the housing sector but the economy.
  • Lumber prices surged by 120% since mid-April, and the recent dips offset the previous increases by 20%.

Lawmakers demand action to reduce lumber prices

Nearly 100 lawmakers sent a letter to the White House demanding prompt action in addressing steep lumber prices and other construction supply issues, according to the NAHB. HBSDealer

  • The congressional letter was sent on October 20 and it detailed how the increase in lumber prices had affected the prices of single-family homes, which soared by around $16,000 in April.
  • Lawmakers also noted how the housing sector is vital in creating jobs and improving the economy in the latter.
  • Furthermore, the letter asks President Donald Trump to “bring all stakeholders and work to find a solution to address lumber scarcity and subsequent price spikes to ensure everyone’s needs are met.”