Builders grapple with land shortage, soaring lumber costs

LOS ANGELES (AP) — U.S. homebuilders are poised to benefit this spring homebuying season amid strong demand, low mortgage rates and an all-time low inventory of previously occupied homes for sale. But soaring lumber prices and a shortage of construction-ready land could limit their ability to capitalize on the strong housing market trends, analysts say.

The price of lumber more than doubled over the last year to an all-time high, reflecting strong demand for new construction and home remodeling, and pandemic-related problems limiting production.

The sharp rise in the cost of lumber, among other building materials, is a concern to builders because it drives up costs, potentially shrinking the pool of would-be buyers who can afford to purchase a home.

Builders are also grappling with a shrinking supply of developed lots, or land that’s ready for construction.

Ali Wolf, chief economist at housing market data tracker Zonda Economics, forecasts that new U.S. home sales will rise 5% this year over 2020. That would be a far slower pace of growth than the nearly 20% jump last year from 2019.

“Supply is the limiting factor,” Wolf said. “If builders had more homes to sell, sales would be higher.”

Robert Dietz, the National Association of Home Builders’ chief economist, hasn't issued a forecast, but also expects sales to grow at a slower pace, despite an overall strong housing market.

“The homebuilding market is going to grow in 2021, but the growth rate itself is going to be lower than what we experienced in 2020, due to the fact that these housing affordability headwinds like lumber, a lack of lots, are becoming more binding this year,” Dietz said.

The housing market mounted a strong comeback last summer after declining sharply in the spring when the...