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This week: the end of OSHA COVID-19 rules for construction sites, why home prices continue climbing, Biden’s concerning supply chain plan and how much lumber drives new home prices.
Lumber still high, but recent price peak may ease homebuilding costs
As we previously discussed on Construction Beat, lumber isn’t the only material with skyrocketing prices, but it may be the most expensive. A new Bank of America Global Research report shows just how much rising lumber prices are dramatically increasing the price of building a home. In some markets, lumber has added as much as $34,000 to a new home’s price tag. The report found the total price of lumber and manufactured lumber products for an average single-family home jumped 184% from April 2020 to April 2021.
But there’s encouraging news for both builders and buyers: Lumber prices are beginning to calm after their April/May peaks (see Trading Economics). While the supply of homes remains limited, homebuyers can expect a mild reduction in the additional costs of home building due to lower lumber prices. Make no mistake – the price of lumber remains relatively high. For example, the price of lumber on June 3 was $1,150 compared to $849 on Jan. 3, an increase of 35% over a five-month span.
Home price climb continues; buyers value utility
The AEI Housing Center recently released its report on the national Home Price Appreciation Index. For April 2021, the national HPA averaged 13.6%, up from 12.4% the month prior and 6.6% a year ago. The report indicates projects the HPA will rise to the 15-18% range in the coming months due to low interest rates, tight supply and the future of remote work.
The question on everyone’s mind: How long will this last? One school of thought believes higher home prices and tight supply will be here to stay as long as remote work remains prevalent. Buyers appear to be valuing home utility more than anything, with a greater emphasis on home offices, workout spaces and rooms for children – creating a need for larger lots.
However, many experts aren’t as certain about both the short- and long-term outcomes. Zonda’s chief economist Ali Wolf believes predicting trends won’t be as easy as many think:
If you are even moderately interested in #housing, listen up. Supply and intentional sales caps are going to make trends very difficult to interpret over the next 6 months. These are the things you need to know: 1. Contract sales last June, July, and August were unbelievably good
— Ali Wolf (@AliWolfEcon) June 11, 2021
AGC chief: Biden supply chain plan hurts builders
The Biden Administration recently announced it will establish a task force to address bottlenecks for industries like homebuilding and construction following the president’s executive order focused on addressing U.S. supply chain difficulties. The group will primarily focus on developing both public and private solutions to help alleviate supply chain disruptions.
Part of the report suggested the Biden Administration work with industry and labor officials to empower workers. In response, Associated General Contractors of America CEO Stephen E. Sandherr said many of the report’s solutions would actually create further difficulties for the construction industry. “The President could provide immediate relief from soaring prices for lumber, steel and aluminum by removing harmful tariffs and quotas,” Sandherr said. “Unfortunately, the President’s recommendations ignore that quick and effective approach. Instead, these proposals would limit the ability of workers and employers to fill needed construction positions.”
Some companies have elected to address supply chain issues by taking matters into their own hands. The Home Depot, for example, recently contracted its own container ship that the company’s president said will be “100% dedicated to Home Depot.” This, however, is just one unusual measure companies are taking to address supply chain issues. Other companies began stocking warehouses to the brim, relying on air freight and expanding their global supply vendors.
OSHA’s new rule removes COVID-19 restrictions for builders
The Occupational Safety and Health Administration issued its long-awaited COVID-19 Emergency Temporary Standard last week, and builders can rejoice. The ETS lays out rules and regulations employers must follow to protect workers from the infection of COVID-19.
The good news: The ETS does not apply to the construction industry. Instead, the ETS will only apply to workers in healthcare settings. This comes as a major win for employers across the nation. As we wrote about in our previous Construction Beat, employers were unsure if OSHA would release its standard after U.S. Labor Department Secretary Marty Walsh put it on hold. Many employers worried that such a standard was unnecessary due to rising vaccination numbers and the relaxing of governmental restrictions.
President Biden first tasked OSHA with creating this standard at the beginning of his time in office, expecting the ETS to be released in March. The mere issuance of the ETS – three months later than originally expected – may come as a surprise to some. Either way, this is a win for employers in the construction sphere who can continue to operate at their job sites with “business as usual,” subject to local and state regulations.
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