Wonder Why More New Homes Are Not Being Built?

With the inventory of homes for sale remaining at historically low levels for the last couple of years home buyers may be wondering why there aren’t more new homes being built?  Actually, in St Louis, new home construction has been increasing at a pretty good rate but it appears more homes can be absorbed by the market than are being built.

The answer to why more homes are not being built is probably the result of many things such as a lack of available ground in areas that are in demand, a shortage of contractors and tradesmen, the complication of, and cost related to regulatory compliance and the ever increasing cost of building materials.  The cost of many building materials has increased significantly but lumber prices, which is a major component of a new home in many ways, have just shot into the stratosphere.  As the chart below shows, the Producer Price Index for lumber and wood products shot up to 441 in March, an increase of 84% from a year ago.

According the National Association of Home Builders (NAHB) the price increases in lumber have caused the price of an average home to increase by $24,000 since April 2020 just to cover this increased cost.

  

Producer Price Index by Commodity: Lumber and Wood Products: Softwood Lumber

(click on chart for live chart and more data)

Producer Price Index by Commodity: Lumber and Wood Products: Softwood Lumber

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