Strong data in the construction industry, particularly for home construction, has continued in recent weeks despite the ongoing impacts of the coronavirus (COVID-19) pandemic. Indicators suggest the remodeling market is also strong, according to National Association of Home Builders (NAHB) chief economist Rob Dietz's analysis on the NAHB Now blog. Despite strong trends in home construction and remodeling, Dietz says there are growing concerns over rising lumber and material costs.
The NAHB Remodeling Market Index (RMI) registered a score of 73 for the second quarter, reflecting positive market sentiment in the home improvement sector due to a growing focus on the importance of home for most families as a place to live, work and study.
As we have been forecasting since March, housing should be a bright spot for the economy, particularly given historically low interest rates and the increase in housing demand for low density communities. However, risks remain: At the macroeconomic level, layoffs continue to be elevated, with 1.3 million new job losses reported for the week ending on July 4. And ongoing, continuing jobless claims imply an unemployment rate of approximately 13%.
For builders, access issues and delivery delays for building materials are increasingly yielding higher prices. In particular, lumber prices continue to climb, reaching an average price of more than $550 per thousand board feet in mid-July—the highest since the tariff-induced run-up of prices in 2018. While sawmill employment increased in late spring in the United States, a resolution of the U.S.-Canadian softwood lumber dispute would more significantly boost housing, and in turn, the overall economy.
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