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 does the unemployment picture look like?
It depends on where you live. The national unemployment rate has fallen from nearly 15% in April down to 8.4% percent last month. That number, however, masks some big differences in how states are recovering from the huge job losses resulting from the pandemic. Nevada, Hawaii, California and New York have unemployment rates ranging from 11% to more than 13%. Unemployment rates in Idaho, Nebraska, South Dakota and Vermont have now fallen below 5%.
Will it work to fine people who refuse to wear a mask?
Travelers in the New York City transit system are subject to $50 fines for not wearing masks. It’s one of many jurisdictions imposing financial penalties: It’s $220 in Singapore, $130 in the United Kingdom and a whopping $400 in Glendale, California. And losses loom larger than gains, behavioral scientists say. So that principle suggests that for policymakers trying to nudge people’s public behavior, it may be better to take away than to give.
How are restaurants recovering?
Nearly 100,000 restaurants are closed either permanently or for the long term — nearly 1 in 6, according to a new survey by the National Restaurant Association. Almost 4.5 million jobs still haven’t come back. Some restaurants have been able to get by on innovation, focusing on delivery, selling meal or cocktail kits, dining outside — though that option that will disappear in northern states as temperatures fall. But however you slice it, one analyst said, the United States will end the year with fewer restaurants than it began with. And it’s the larger chains that are more likely to survive.
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