Here’s a summary of CoreLogic’s view of new construction activity during Q2 2021.
Summary of New Construction Activity in Q2 2021
New construction in residential real estate is crucial to help counter our country’s severe housing shortage. Industry experts estimate that the US needs approximately 4.0 M- 4.5M homes to house our population.
Here is a summary of CoreLogic’s latest intelligence on the state of new home construction during Q2 2021:
- Authorization for new housing permits increased +25% y/y in June 2021
- Costs for plywood and lumber continued to increase +100% y/y
- Labor costs increased +5% y/y
- Confidence among new home builders was higher in June y/y (from 62 in Q1 to 65 in Q2 2021) though confidence in commercial construction continued to be much lower than pre-pandemic confidence levels
- 72% of commercial contractors experienced project delays due to COVID
- Average share of 17% of both commercial and residential projects experienced delays due to COVID
- 84% of contractors faced at least one material shortage
After many, many sawmills closed down during the COVID pandemic, an unexpected homebuilding boom ignited. Steep demand for lumber coincided with extremely low supply and sawmills struggled (and continue struggling) to “catch up” with demand. The result? Unprecedented lumber costs though lumber costs were beginning to slow in Q2 2021.
Of course, soaring lumber and material costs due to many pandemic-induced supply chain shortages caused new and existing home prices to increase +14% y/y and +17% respectively during Q2 2021. All “players” in the construction industry (insurance carriers, contractors, homeowners) became very well aware of the impact of such increased costs and wait times on both national and regional levels.
Changes in Material & Labor Costs Y/Y
½” Plywood increased +165% y/y in June 2021.
2 X 4 Lumber increased +129% y/y in June 2021.
2 X 10 Lumber increased +104% y/y in June 2021.
Romex wire increased +66% y/y in June 2021.
1 X 4 Oak increased +34% y/y in June 2021.
Due to an ongoing shortage of construction workers since the housing crisis of 2008-2009 and the deep recession of 2010, construction companies are needing to pay higher rates for skilled labor. In the US, residential and commercial labor costs have grown as high as +9% from June 2020 to June 2021, according to CoreLogic.
Residential Reconstruction Cost Changes from Q1 2021 – Q2 2021
The national average increased +1.4% for final residential reconstruction costs from Q1 to Q2 2021.
States with the highest cost increases included:
- Maine – +3.3%
- South Dakota – +2.6%
- Alabama – +2.5%
States with the lowest cost increases included:
- New Jersey – +0.7%
- California – +0.7%
- New York – +0.7%
Thanks to CoreLogic.