Seven Must Reads for the CRE Industry Today (May 18, 2021) Rising rent prices could contribute to stronger long-term inflation trends, according to the Business Insider. Commercial Observer looks at how proptech boomed during the pandemic. These are among today’s must reads from around the commercial real estate industry.
Rent’s Big Comeback Could Be the Thing That Makes Stronger Inflation Permanent “Rent prices tumbled at the start of the pandemic and are only just now on the rise. But where inflation in other pockets of the economy is expected to cool off, rent might just keep climbing. The Federal Reserve, Biden administration officials, and much of Wall Street see elevated overall inflation eventually moderating as the economy settles into a new normal.” (
April 22, 2021
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It’s a headline builders and consumers have read dozens of times since spring of 2020: lumber prices are skyrocketing. But how are other builders handling cost increases? The National Association of Home Builders asked builders how they are dealing with prices and how long lumber prices are guaranteed in the latest iteration of its NAHB/Wells Fargo Housing Market Index. The top three ways builders are coping with rising lumber costs are to include price escalation clauses in contracts (47% of respondents), pre-ordering lumber (29%), and obtaining lumber price guarantees from suppliers (22%).
Although price escalation clauses are by far the most common response to rising lumber prices, in addition at least 10 percent of the builders reported pre-ordering lumber, obtaining lumber price guarantees from suppliers, pausing before starting to frame the structure, otherwise delaying building or sales, and including shared price clauses in sales co
New home construction has lagged since the 2007-09 recession, and now the chickens are coming home to roost: Builders would need to construct 3.8 million single-family homes just to catch up with existing demand, and the shortage is pushing up housing prices and threatening to slow down the entire economy.
That’s the conclusion of an analysis by Freddie Mac Chief Economist Sam Khater, who says the problem is particularly acute for first-time buyers. Last year, builders completed just 65,000 entry-level homes, even as 2.38 million renters became first-time homebuyers.
“As we navigate our way through the year and get beyond the pandemic, we expect the housing supply shortage to continue to be one of the largest obstacles to inclusive economic growth in the U.S.,” Khater said in the report. “Simply put, we must build more single-family entry-level housing to address this shortage, which has strong implications for the wealth, health and stability of American communities.”
Chuck Fowke | Photo credit: NAHB
Nationwide builder sentiment rose by 1 point to 83 in April, according to the National Association of Home Builders/Wells Fargo Housing Market Index. That number was at 30 at the beginning of the pandemic in April. Anything above 50 is considered a good market.
The index is based on a scale from zero to 100 and gauges builder perceptions of single-family homes sales and sale expectations for the next six months.
Amid historically low inventory across the United States, construction is becoming a more attractive option. As a result, lumber is at an all-time high of $1,212.70 per thousand board feet.
Builders are facing strong demand from potential buyers because the existing home market continues to suffer from a record low number of listings. They are, however, having trouble meeting that demand, as supply delivery challenges and higher costs for materials are not improving.
Lumber futures for May delivery hit a new intraday all-time high of $1,212.70 per thousand board feet on Wednesday. The supply chain for residential construction is tight, particularly regarding the cost and availability of lumber, appliances, and other building materials, said NAHB Chairman Chuck Fowke, a custom homebuilder from Tampa, Florida. Though builders are seeking to keep home prices affordable in a market in need of more inventory, policymakers must find ways to increase the supply of building materials as the economy runs hot in 2021.