— This is the script of CNBC's news report for China's CCTV on May 19, 2021, Wednesday.
In addition to the decline in house start numbers, data from the Commerce Department of the United States also shows that the number of houses authorized for construction but not yet started increased to the highest level since 1999. And roughly 15% of builders said they are putting down concrete foundations and then holding off on framing the house. This counts officially as a "start", but it doesn't create a house. All of these indicate some hesitancy on the part of builders, although demand for houses is elevated due to the ultra-loosen monetary policy. And that can be largely explained by the soaring prices of various construction materials, especially lumber.
The price of lumber futures traded at the Chicago Mercantile Exchange has increased rapidly since the start of the pandemic and reached a record high in early May. The current level is 256% higher than a year ago and the year-to-date return is over 110% despite the recent pullback. The surge in lumber prices in the past year has added nearly $36,000 to the price of an average new single-family home, according to the NAHB.
Brooks Mendell
President and CEO of Forisk
"It is remarkable in the history of the sector. it is a physical constraint of the business trees take a long time to grow and sawmills take a couple of years to build at the beginning of covid and the recession hit, the sawmill slowed down and capacity slowed down，and everybody at home as you mentioned, kept doing projects and home demand continued. "
The U.S. is not alone. Media reports are telling a similar story in the UK and Germany, with housebuilders facing a shortage of different kinds of materials. Besides lumber, many other construction materials also see their prices soaring, that include steel, concrete, gypsum and insulation materials, and many more. The price of copper has surged 90% in the past year. With high prices, speculative hoardings have made the situation even worse.
All these could push up housing prices in these countries. According to Zillow, a house market information provider, the typical value of a home is 11.6% higher than that of a year ago and will rise by 11.8% in the coming year. Inflation risk is rising and worth watching.