Lumber prices are seeing a consistent drop, but what does that mean for the housing shortage? July saw another drop in the price of lumber- by more than 50% since the highest peak in May of 2021. The price of other key building materials are also dropping, giving many hopes that the current housing shortage may soon come to an end.
How the Housing Shortage Began
Even before COVID-19, the Houston real estate market had long been going strong. With the economy tanking, mortgage interest rates fell to historic lows. If potential homebuyers were not qualified before, the low interest rates were a great help. Others simply wanted to take advantage of getting the best deal possible and buyers of all sorts saw fierce competition both in the resale and new construction markets. Combined with an uptick of home renovations, climate change concerns, and lumber mills around the country being shuttered for safety, supply of lumber simply could not keep up with demand.
All the while, homeowners faced tremendous uncertainties: job loss, mortgage forbearance, coronavirus exposure during showings, and the inability to find a new home before selling. Fewer and fewer homes were coming on the market, creating the perfect storm for rapidly rising material costs and soaring home prices.
Experts Still Uncertain
Opinions on the economy and the future of the housing market are still mixed. With businesses reopening and a “new normal” forming, some economists predict a rosy future for business. New infrastructure investments, new tax plans, and increased consumer confidence can only help. A year-over-year economic growth of 3.8% is predicted for 2022.
The question of the housing market remains — with so many homeowners in forbearance, will 2022 see record foreclosures? Other concerns include rapid inflation, an end to stimulus payments, and continued disruptions in supply chain as well as labor shortages.
The Impact in Houston
The City of Houston still has a long way to go when it comes to economic recovery. Job losses due to lockdown in 2020 have only returned by approximately 30%. Unemployment claims in Houston are hovering just below 10%. Our biggest economic sector, oil and petrochemicals, have seen a history of disasters unrelated to administration changes and pandemic issues.
Not all hope is lost, however. Many Real Estate experts are skeptical that a housing bubble burst is on the horizon. 30-Year Fixed Mortgage Rates are still below 3%. Mortgage forbearance rates are declining. Demand for both resale and new construction properties remains strong and inventory new to the market is finally increasing. The market is currently still in favor of homesellers and a desperate Buyer’s market does not appear to be in the works. It remains entirely possible that the Houston real estate market will simply return to a more balanced state.
Written by Kathryn Yacovodonato