LUMBER PRICES ARE FALLING, BUT HOUSING AFFORDABILITY REMAINS AN ISSUE.

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With interest rates reaching historic lows in a persistent seller’s market, the new-home construction industry is facing a test of successfully balancing supply and demand.

In the premiere episode of the interactive series “Keepin’ It Real with Nick Bailey,” RE/MAX President Nick Bailey and two guests explore all sides of the new-home construction market. The discussion covers what consumers need to know and how real estate agents can grow their business in the homebuilding space.

Construction slowdowns and current pricing

With high-demand materials like lumber a scarce resource, both prices and timelines of new-home building are exaggerated beyond typical terms.

“Prices are going up drastically and the demand is there, but we don’t have enough [inventory] to meet what people are needing,” says panelist Tammy McCall, Realtor Relations Extraordinaire with Johnson Development, one of the largest residential and commercial development companies in Texas and Atlanta.

“Buyers need to be patient,” she continues. “The homes are there; the homes are coming. But unfortunately, builders are having to slow their pace down so they can rationalize and [set prices at] something people can afford. I think the biggest thing for buyers to know is to be patient and work with your Realtors.”

That sentiment was echoed by the show’s other guest.

“Builders are having a very, very difficult time getting a consistent supply of building materials, and getting them at a reasonable price,” said panelist Jerry Howard, CEO of the National Association of Home Builders.

Although lumber futures prices have come down, many builders are working with lumber they purchased when prices were higher, Howard notes. “It’s going to take a while before that (futures price) reduction manifests itself in the actual housing markets.”

Noting that he would like to see sawmills increase their production, Howard says he’s hopeful lumber prices will continue to drop.

“We believe it will be the end of this year before we really see impact on the markets,” he says.

The important role of the real estate agent

Both Howard and McCall agree that the assistance of a real estate professional is key for consumers to navigate new home development, especially in this tumultuous market.

“Most builders freely acknowledge they are builders, not salespeople – and they value the relationships they have with their Realtor friends,” Howard says.

“Builders love working with Realtors,” McCall says. “We need to communicate and continue to work together. Relationships with the builders are critical, and sometimes Realtors [don’t] understand that.”

She explains that agent-to-builder relationships must be founded on more than just the prospect of referrals. Agents should commit to understanding the complex world of homebuilding and be able to relay insight to consumers, McCall says.

Making change and working toward affordability

According to Howard, housing affordability has been an issue since before the COVID-19 pandemic. He points to the last election cycle, in which he says every major candidate for the U.S. presidency had a plan for housing.

“The cost of keeping America housed the way we’re used to being housed has gone far out of whack. It’s still a problem, and it’s going to be a problem until we look at it holistically,” he says, noting that affordability will remain an issue until all three levels of the U.S. government address it.

Involvement in the new-home construction space must be happening at both the national and local levels to make change and push affordability.

“[Real estate] associations should get with their local home builder associations to develop policies at the local level,” Howard advises. “It has to be a coordinated effort.”

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