The U.S. saw new home construction drop by nearly 10% in April, a surprising development which has some economists worried about what they summer may be like.
Analysts believe one reason is contractors are delaying projects in hopes lumber prices will drop. Lumber prices have gone through the roof since the beginning of the year, (pun intended).
The Commerce Department reports the April decline left construction at a seasonally adjusted annual rate of 1.57 million units, down from 1.73 million units in March.
It is important to note, the March numbers had been the highest increase since July of 2006 at the peak of the housing boom. That and the fact building permit applications increased in April are encouraging signs.
According to the National Association of Home Builders, the cost of lumber has increased the average price of a single family home by more than $35,000.
Economists are optimistic the housing market, which is a key economic indicator, will continue to gain strength in 2021.
A home builder survey indicates builder confidence remains high despite higher prices for materials. Data shows aggregate residential construction material costs are up 12% since 2020.
Economists say low interest rates are supporting housing affordability despite the rising cost of materials.
New housing constructions starts wasn't down in every region. Construction rose 9% in the west and 6% in the northeast, but the overall numbers took a big hit with a 34% drop in the midwest and an 12% fall in the south.
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