Shortage of Lumber Feared to Paralyze the U.S. Housing Market

SEATTLE (Scrap Monster): The U.S. housing market is likely to face threat as the supply of available homes ceases. The homebuilding activity had come to a stall following the spread of the pandemic. However, the house construction activity has witnessed sharp recovery in the recent months. The housing market is one of the many few sectors that have witnessed V-shaped recovery.

The privately-owned housing starts recorded 17.3% jump in June over the previous month. It must be noted that the starts had plunged by 30.2% in April this year. The seasonally adjusted annual rate stood at 1.19 million units in June, which was significantly higher by 17.3% from the rate during the prior year.

Record-low mortgage rates and severe supply shortage of existing homes are likely to support new housing construction in the near term. Incidentally, the sale of new homes had surged higher to hit the highest levels in 13 years during June this year.

The lumber prices, which have risen by around 60% over the past six months, have surged higher by nearly 11% from May to June this year. The higher lumber prices could boost new home prices, thus making new houses less affordable to customers. The escalated lumber prices will further squeeze the builders’ tight margins. This in turn could have negative impact on the entire sector.

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