THE REAL ECONOMY
The strong housing market in North America
North American housing markets remain bullish
THE REAL ECONOMY | July 19, 2021
In spite of the pandemic, housing markets in the United States and Canada have seen significant growth over the past year as individuals and families stuck in apartments were driven to the suburbs in search of bigger homes with space to live, work and play. In addition to a rise in demand for single-family housing, housing supply shortages, higher material prices, fewer available lots and ongoing zoning restrictions are driving existing and new home prices up across both countries.
Construction material prices have been on the rise since the middle of 2020, bringing with them higher retail home prices. According to the National Association of Home Builders, the surge in lumber prices alone has resulted in the average price of a new single-family home in the United States rising by $36,000, to about $330,000, with lumber representing about 11 per cent of the total value. Lumber is not the only material tracking record highs. The U.S. Producer Price Index hit new highs in April for a significant number of building materials, including steel pipe and tubes, and plastic products, further driving up construction costs.
MIDDLE MARKET INSIGHT
Construction material prices have been on the rise since the middle of 2020, bringing with them higher retail home prices.
In addition to the cost of materials, contractors have found difficulty securing permitted lots to build on. Municipalities in both Canada and the United States have created obstacles to development in the suburban markets that are now attracting new homebuyers looking for indoor and outdoor space at home. Laws that limit building often require minimum lot sizes, have parking requirements and even ban multi-family housing altogether; these drive up costs and keep families stuck in their communities. In Canada, challenging suburban building restrictions such as these and a lack of available lots are driving more developers to continue building multi-family housing instead of the single-detached and semi-detached units that many Canadian consumers are demanding. This disconnect between market supply and demand will continue to send Canadian home prices soaring beyond the 11.9 per cent year-over-year increase already seen in the major markets.
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Source: RSM Canada LLP
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