The following analysis was recently published in NAHB’s bi-weekly e-newsletter Eye On the Economy by Chief Economist Robert Dietz:

While risks persist, recent economic data have shown rapid improvement relative to dramatic declines in mid-spring. And housing data have led the way:

Proving wrong predictions of substantial home price declines, Case-Shiller data indicate a 4.7% year-over-year price gain in April. These gains have been fueled by low interest rates and a renewed focus on the importance of “home” during the ongoing public health crisis. According to Freddie Mac, the average 30-year mortgage interest rate was just below 3.1% at the start of July.

Given this backdrop, housing data continue to improve. The NAHB/Wells Fargo HMI has moved into positive territory, single-family permits were up 12% in May, and the resale market is recovering. According to the National Association of Realtors, pending resales increased 44% in April as the market gained ground off of March lows. Existing sales were being held back by a much-reduced level of listings. As the inventory numbers improve, housing market volume is expanding.

The labor market is following the positive trends in housing. In May, construction hiring surged and job openings increased to 365,000, down only slightly from the 373,000 tally measured a year earlier. Indeed, home builders and remodelers added 83,200 jobs in June, after gaining 224,200 in May. This pickup matched the broader economy, which saw an employment gain of 4.8 million and a decline for the unemployment rate to 11.1%. The true jobless rate is higher than the official rate, but the NAHB forecast sees an unemployment rate near 10% at the end of 2020.

But risks remain. Rising virus-related hospitalizations in some southern and western states indicate ongoing community spread and threaten additional government-imposed economic shutdowns. Moreover, recent housing strength is, in part, due to an unlocking of sidelined housing demand from the early spring.

As this demand is met, some momentum for housing will ease. And double-digit unemployment rates will weigh on rental housing and entry-level housing demand during the second half of the year. However, low interest rates and the changing geography of housing demand (smaller metro and outer suburb demand outperforming large metro areas) suggest housing will continue to lead the economic recovery.

To subscribe to the Eye on the Economy e-newsletter, email communications@nahb.org.

The Random Lengths Framing Composite Price hit $523 per 1,000 board feet for the week ending July 10, marking the first time prices have topped the $500 level since July 2018. Indeed, lumber prices have soared 50% since April 17, 2020.

The primary drivers of the price increase include:

• Mills closed in the spring due to stay-at-home and social distancing measures enacted by state and local governments.
• When prices fell between March and April as a result of the COVID-19 pandemic, mills projected that housing would be adversely affected and therefore anticipated a large drop in demand. Accordingly, mills that remained operational substantially decreased capacity utilization.
• Producers did not anticipate the massive uptick in demand from do-it-yourselfers (DIY) and big box retailers during the pandemic.
• Housing weathered the storm much better than most anticipated.
• DIY demand has not abated much as states reopen and construction demand has far surpassed lumber mills’ projections.

The combination of all of these factors has caused a dislocation of the usual supply/demand equilibrium. Suppliers continue to catch up to orders to the point that, in some cases, builders and traders are being forced to place orders without a delivery date or price. Mills were taking orders to the end of July back in early-June, which may have been the driver of the large increase in lumber futures over the past few weeks.

Tariffs Exacerbate Price Spikes

The recent spike in all northern U.S. and Canadian species has no doubt been exacerbated by the lumber tariffs averaging more than 20% on Canadian imports into the U.S. market.

The Commerce Department has indicated it could lower the countervailing and antidumping duties to just over 8% in August following an administrative review of the tariffs.

For more information on the recent lumber price hikes, contact David Logan at 1-800-368-5242 x8448.

NAHB Education is offering a variety of dynamic webinars for housing industry professionals every Wednesday in July. These webinars are structured to help participants expand their knowledge about industry best practices in customer service, design, and sales and marketing. Many are offered at a discount to NAHB members, including several that are free for certain council members.

Be sure to reserve your spot today! If you are unable to attend, you will get access to the webinar replay for 12 months.

Check out the schedule for July:

Update Your Elevations: A Live Demo on Applying Multiple Facades to a Single Floor Plan
Wednesday, July 15
1-2 p.m. ET

Learn how to create multiple unique elevations ranging from traditional to contemporary in a live 3D modeling demonstration. Walk away with the knowledge to offer your clients a variety of options and the choices they desire. Register now.

Evergreen Online Lead Conversion: Creating a Strategy That’s Ready for the Unexpected
Wednesday, July 22
2-3 p.m. ET

Build a successful digital marketing engine that converts online leads and boosts sales in the unpredictable markets where you operate. With the impact of COVID-19 still looming, you’ll learn what it takes to navigate change and create a business pipeline that’s not just immune to disruption, but actually designed for it. Free for NAHB’s National Sales & Marketing Council members. Register now.

New Rules for Creating an Exceptional Customer Experience
Wednesday, July 29
2-3 p.m. ET

Discover the biggest pain points for home buyers and how your team can provide “WOW” moments to ensure high levels of customer satisfaction and the end-to-end experience buyers want. Register now.

Register today. For questions about registration, please contact Deborah Krat at EdWebinars@nahb.org.

The NAHB Young Professional (YP) Awards annually recognize young building industry professionals under the age of 45 who:

• Propel their careers forward;
• Advance in all three levels of the NAHB Federation;
• Advocate for the home building industry; engage with their peers; and
• Establish themselves as exceptional members of their communities.

“The annual YP Awards are the premier way to highlight young industry professionals who are changing the way the world looks at the construction industry today,” shared Heather Laminack of Ferrier Builders, 2020 chair of the Young Professionals Committee. “These awards will go to the best of the best from across the country, showcasing individuals’ innovation, community and industry involvement, career advancement and leadership in the building industry.”

A panel of five judges select 15 finalists and five winners. One winner will be selected from each NAHB national region (A-E).

Anyone under the age of 45 who meets the criteria is highly encouraged to apply, Laminack added. Nominees must be active members in good standing, excluding last year’s winners, judging panelists and the current NAHB Young Professionals Committee chairman. Industry and membership areas within NAHB had also previously recognized rising stars within their segments; members are encouraged to nominate these stars for the YP Awards to recognize their efforts.

Applications are open until Oct. 16, 2020. Apply today or nominate an outstanding YP in your network at awards.nahb.org.

The Federal Housing Finance Agency (FHFA) announced today that Fannie Mae and Freddie Mac will extend several loan origination flexibilities until Aug. 31, 2020, to ensure continued support for borrowers during the COVID-19 national emergency. The flexibilities were set to expire on July 31.

Extended flexibilities include:

• Alternative appraisals on purchase and rate term refinance loans;
• Alternative methods for documenting income and verifying employment before loan closing; and
• Expanding the use of power of attorney and remote online notarizations to assist with loan closings.