Soaring building material costs, high demand and low inventory have added tens of thousands of dollars to the price of a new home and caused housing affordability to fall to its lowest level in nearly a decade during the second quarter of 2021, according to the National Association of Home Builders (NAHB).
According to NAHB/Wells Fargo Housing Opportunity Index (HOI) released Aug. 5, 56.6% of new and existing homes sold between the beginning of April and end of June were affordable to families earning the U.S. median income of $79,900.
This is down sharply from the 63.1% of homes sold in the first quarter of 2021 and the lowest affordability level since the beginning of the revised series in the first quarter of 2012, NAHB writes.
"Runaway construction cost growth, such as ongoing elevated prices for oriented strand board that has skyrocketed by nearly 500% since January 2020, continues to put upward pressure on home prices," said NAHB Chairman Chuck Fowke, a custom home builder from Tampa, Fla. "Policymakers must address supply chain bottlenecks for building materials that are raising costs and harming housing affordability."
"Recent NAHB analysis shows that higher costs for lumber products have added nearly $30,000 to the price of an average new single-family home and raised the rental price of a new apartment unit by more than $90," said NAHB Chief Economist Robert Dietz. "With the U.S. housing market more than 1 million homes short of what is needed to meet the nation's demand, policymakers need to focus on supply-side solutions that will enable builders to increase housing production and rein in rising home prices."