New Construction Sector of Housing Market Struggles in July 2021

According to date released by the U.S. Census Bureau (“USCB”) on Tuesday, July 20, 2021, building permits dropped to its lowest point since August 2020; roughly 100,000 units below the six-month average. Building permits serve as a proxy for the health of the new construction sector of the housing market. While the market for single-family homes is struggling with low inventory and skyrocketing value, the massive slowdown in new construction could prove devastating as more potential buyers are priced out of the market.
One of many factors that could be causing the slowdown in new construction is the surging price of materials, a shortage of labor, and increasing regulatory costs. When new construction is less profitable, it follows that there will be less new construction. In fact, confidence in the new construction sector has been dwindling, dropping significantly in July 2021.
According to the UCSB, the median cost of new construction in May 2021, was 18% higher than it was in May 2020. While the costs of raw material have decreased in recent months, consumers and builders have not yet reaped the benefit of those decreased costs. Moreover, many companies focused on new construction have reported delays of several months in the delivery of items which are essential to the construction of new homes (e.g., heating units, windows, etc.,). Ultimately, this all combines to further exacerbate a housing market struggling to adjust to record low inventory.
At the Chernov Team we understand that knowledge is power, and knowledge of how the new construction sector of the housing market is performing is powerful knowledge indeed. At the Chernov Team we know that whoever comes to the table most prepared leaves with the most, and the Chernov Team always leaves the table with the most.