The Commerce Department reported Tuesday that builders broke ground on almost 1.5 million new homes in July — that’s up more than 22% from June. But those new homes won’t be cheap because prices for raw materials like lumber are skyrocketing.
Mark Konter has some bad news for his customers. He’s a homebuilder and part-owner of Konter Quality homes in Savannah, Georgia. He’s raising prices this week because the price he pays for timber is going through the roof.
“From July 1 to Aug. 1, we were up just shy of 45%, in that short, 30-day period alone,” Konter said.
The higher lumber costs will tack $8,000 to $14,000 onto the price of one of his new homes. The rising cost of two-by-fours is rooted in simple economics — supply and demand. The supply of timber is down because lumber mills shut down at the height of the pandemic. Housing demand, though, surged, according to Jerry Howard, head of the National Association of Home Builders.
“I don’t think anyone anticipated housing to come back this strongly, placing this much pressure on the demand for all the components that go into a house,” Howard said.
He said prices for hundreds of components that are made in China are also up. Remember the trade war? Nails, hammers and bathroom fixtures are all subject to hefty tariffs. Still, housing demand won’t fall anytime soon, said Oxford Economics lead economist Nancy Vanden Houten.
“People want to have larger homes where they can work from home,” Vanden Houten said. “They want space to be outside if social distancing is something that’s going to be with us for a while.”
Vanden Houten said as long as interest rates stay low, buyers won’t be scared off by the higher prices.
COVID-19 Economy FAQs
What’s the outlook for vaccine supply?
Chief executives of America’s COVID-19 vaccine makers promised in congressional testimony to deliver the doses promised to the U.S. government by summer. The projections of confidence come after months of supply chain challenges and companies falling short of year-end projections for 2020. What changed? In part, drugmakers that normally compete are now actually helping one another. This has helped solve several supply chain issues, but not all of them.
How has the pandemic changed scientific research?
Over the past year, while some scientists turned their attention to COVID-19 and creating vaccines to fight it, most others had to pause their research — and re-imagine how to do it. Social distancing, limited lab capacity — “It’s less fun, I have to say. Like, for me the big part of the science is discussing the science with other people, getting excited about projects,” said Isabella Rauch, an immunologist at Oregon Health & Science University in Portland. Funding is also a big question for many.
What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?
Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”
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