The housing market in the United States remained resilient in May as developers continued to grapple with higher costs amid a shortage of supply. Housing starts rose 3.6% to 1.57 million while permits dipped 3% to 1.68 million, according to Commerce Department data released on Wednesday.
While off the peaks from earlier this year, both figures are above the long-term equilibrium rate of 1.5 million, signaling that the market continues to deliver housing at a strong and sustained rate.
It will be critical that homebuilders continue to outperform the long-term equilibrium, considering the shortage of inventory that the industry is facing. The National Association of Realtors, for example, recently released a report saying that builders fell 5.5 million units short over the past 20 years of development. This shortfall is now hitting surging demand, which has sent median new home prices soaring to $341,600.
While there are still headwinds such as a lack of permitted land, labor and materials, one supply chain that appears to be turning around is lumber. Lumber commodity prices surged to $1,686 per thousand board feet on May 7, but have steadily declined over the past month and sit at $989.70 as of Wednesday.
The easing of lumber prices will help with affordability. The runup in lumber prices has added an estimated $36,000 to the price of new homes recently, according to the National Association of Home Builders. Still, the price of lumber is nearly three times what it was just a year ago.
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