Fueled by low interest rates and overall demand, many are eager to buy a new home or take on extensive remodels this year. In addition to demand for housing, lumber price decreases have not materialized for builders yet. Housing affordability is at risk and unless lumber and other supply chain issues are addressed immediately, goals of homeownership will be put on hold for thousands of Clark County families, especially those seeking homes at the lower end of the market.
According to the 2021 edition of the National Association of Home Builders’ (NAHB) What Home Buyers Really Want, the median price buyers expect to pay for a home is about $265,000. Half are looking to pay $250,000 to $1 million, and one-fourth are looking to pay less than $150,000. In contrast, NAHB tabulation of recently released data from the HUD/Census Bureau Survey of Construction shows that the median price of single-family homes started in 2020 and built for sale was $336,000. The vast majority (79%) were priced between $250,000 and $1 million. Virtually none were under $150,000 (only 1% between $100,000 and $150,000 and zero under $100,000).
Last year, new construction provided essentially no new product for the bottom one-fourth of the home buying market. Moreover, in 2021 the situation is likely to get worse, given that the national median price of a new home in May 2021 was up 18% from a year earlier, sitting at $374,400. In addition to the 25% of buyers looking to pay under $150,000 for a home, builders are unable to build new homes in the $150,000 and $250,000 range.
The reasons for this are not mysterious:
- The change in lumber costs between April 2020 and April 2021 added more than $35,000 to the price of construction on an average new home.
- In May, builders reported that material costs in general had increased 26% from a year earlier.
- Builders are dealing with widespread shortages of labor as construction has averaged a 9% growth per year and has consistently been the one of the fastest-growing industries in Clark County.
- The BIA recently reported that regulation accounts for more than $93,000 of the price of an average new home in Clark County.
Buyers unable to find new homes in their price range are also likely to have increasing difficulty finding something in the market for existing homes. In addition to extremely low inventory — last reported to be 0.5 months — prices for existing homes have been rising as well. In Clark County, the total time spent on-the-market decreased to 29 days in April, with the average home sale price increasing to $486,500, and a median home sale price increasing to $435,000. Nationally, the median sales price for existing homes in May was $350,300, up 23.6% from a year earlier, and the 111th consecutive month of year-over-year increases.
The BIAis dedicated to ensuring quality, affordable homes are available to enrich our community and help our neighbors achieve their homeownership goals. To help keep homes at prices within reach for families in Clark County, contact your elected representatives and ask them to take action to address the unsustainable costs of lumber, provide more funding for construction technical education programs, and reduce the urge to increase taxes and fees associated with building homes. Find your elected officials and tell your story at http://biaofclarkcounty.org/advocacy/.
Avaly Scarpelli is the executive director of the Building Industry Association of Clark County.