A record-low number of Americans surveyed last month believe it’s a good time to buy a home as lumber costs and market pressures limit affordability.
Fannie Mae, otherwise known as the Federal National Mortgage Association, reports the January Home Purchase Sentiment Index found just 25% of those surveyed believe it is a good time to buy a home compared to 69% of consumers who believe it’s a good time to sell.
The findings suggest younger adults are caught in the crosshairs due to a lack of affordable housing options which may be delaying ideas of homeownership due to costs according to the survey. In addition, pessimism surrounding interest rate hikes and job security are other factors impacting potential buyers.
Younger consumers — more so than other groups — expect home prices to rise even further, and they also reported a greater sense of macroeconomic pessimism," says Fannie Mae Senior VP and chief economist Doug Duncan. "Additionally, while the younger respondents are typically the most optimistic about their future finances, this month their sense of optimism around their personal financial situation declined. All of this points back to the current lack of affordable housing stock, as younger generations appear to be feeling it particularly acutely and, absent an uptick in supply, may have their homeownership aspirations delayed.
In this Friday, August 10, 2018, photo, signs and flags mark the partially rebuild home of Debbie and Rick Serdin in the Coffey Park neighborhood of Santa Rosa, Calif. (AP Photo/Jonathan J. Cooper)
The concern over home costs is shared by the National Association of Home Builders (NAHB).
According to NAHB, lumber costs in 2020 and 2021 set record highs, even when adjusted for inflation. For example, NAHB cites the Random Lengths Framing Lumber Composite Price which reflected a $1,500 cost per thousand board feet in May of last year which is nearly three times the pre-pandemic record. The price of framing lumber also reached annual records of $550 and $850 in 2020 and 2021, respectfully.
The rise in costs caused by supply chain issues, namely mill prices according to NAHB, is leading to the costs ultimately being handed down to consumers.
In this Nov. 11, 2016 photo, a forklift driver moves a newly assembled panel of cross-laminated timber, or CLT, to a stack in the production facility of D.R. Johnson Lumber Co., in Riddle, Ore. (AP Photo/Gillian Flaccus)
The NAHB writes:
Although mill prices have eased slightly in the past couple of weeks, it will take a sustained downward trend for the typical builder to get any relief. Because of the mechanics of the lumber supply chain, builders and homeowners are unfortunately the last to see their costs go down.
NAHB adds there is a reason for the pessimism, stating increases in softwood lumber production in the last 18 months is not having the desired impact and " the only solution to rising prices is increased sawmill output."
The Fannie Mae survey suggests given current constraints and possible rate hikes, the housing market is expected to slow over the next 12 months.