Housing inventory at record low
Sale prices, lumber costs escalate
Oakland County existing home inventory hit a record low last month as sale prices continued to soar and a continuing Canadian wood shortage caused lumber prices to hit all-time highs.
In February, the county had 1,224 single-family homes for sale, representing just 27 days worth of home inventory, down 55.5% from February 2020. Of course, the county’s record-low inventory caused the average sale price to climb to $357,764, an 18.8% increase from one year ago.
The pattern of low inventory and high sale prices is far from new. In fact, the median sale price of an Oakland County singlefamily home has risen every month since January 2013 from $150,000 to $286,000 last month, according to data released by Realcomp and the Greater Metropolitan Association of Realtors.
Besides limited inventory, another major contributing factor that’s continuing to drive up sale prices is the year-long escalation on the price of lumber, according to Quartz.
Since April 2020, the price of U.S. lumber has increased from around $300 per thousand feet of board to over $1,000, a 180% increase according to the National Association of Home Builders (NAHB). The costs have increased so much so that the expense of building the average single-family home has risen by $24,000 since last April to reflect the cost of wood.
Michael Stoskopf, CEO of the Home Builders Association of Michigan of Southeastern Michigan (HBA), said while the organization is excited about residential permit performance so far in 2021, there are economic headwinds that are continuing to be of concern.
“The foremost factor is construction material pricing escalation, led by softwood lumber prices, which are now at their highest price levels in history,” he said.
A significant reason for the wood shortage is the changing climate and rising temperatures and how it has enabled a beetle species, the mountain pine beetle, to infest forests in the Canadian province of British Columbia, which has been ongoing for years.
Lumber prices could remain high for years to come due in part to the lasting effects of the COVID-19 pandemic, which temporarily caused sawmills to close and increase overall demand for material.
Stoskopf said that when compared to one year ago, the number of residential permits issued across Oakland County in February decreased by 33 to 233, but increased in total overall value from $73.7 million to $75.6 million.
Nationwide, new home permit values have increased by 19 percent nationwide, primarily due to increased material prices, including that of lumber.
Oakland County communities with the most permits issued last month include: 26 in Novi ($134,038 average value), 24 in Troy ($351,375 average value), 19 in Orion Township ($258,526 average value), 18 in Lyon Township ($159,056 average value), and 16 in Birmingham ($540,938 average value).
The trend in the number of residential permits issued per month has not bounced back from pre-Great Recession levels when over 1,000 permits were being issued monthly in Oakland, Macomb, St. Clair, and Wayne counties.
Since January 2006, the number residential permits issued has held steady at 300 to 500 permits per month per county, according to the HBA. A continuing lack of access to capital to build up inventory has prompted many developers to not apply for permits until a residential property is sold.
At this point, the pattern of low inventory, high sale prices, and new home construction not being able to meet overall buyer demand could be the “new normal,” according to Stoskopf.