US housing market analysis: Are we in the midst of an affordability crisis?

Are fluctuating raw material costs worsening the US housing affordability crisis? Urgent action is needed to preserve homebuying opportunities, as explored by the Fastmarkets team

The recent volatility of wood product raw materials prices significantly impacts the US housing market, influencing both demand and supply in construction. With pressure mounting in the framing lumber and structural panel markets, the fluctuating cost of these essential materials creates a ripple effect affecting pricing, project timelines and ultimately the availability of new homes.

The challenge of housing affordability in the United States adds a new layer of complexity to the current economic landscape. Many American citizens are sounding the alarm on what appears to be an emerging affordability crisis within the US housing market, highlighting the urgent need for a solution.

Americans urge action on housing affordability

As the US observes National Homeownership Month, a stark revelation comes to light that four out of five Americans agree that the country is amid a housing affordability crisis and that officials at all levels of government are not doing enough to address the issue. This recent finding is according to a recent survey conducted by the polling firm Morning Consult on behalf of the National Association of Home Builders (NAHB).

The survey found that 77% of the respondents reported a housing affordability crisis in the communities where they live. 80% of respondents said their city and county officials were not doing enough to encourage the production of housing that is affordable to low- and moderate-income households and 51% said their elected representative to the US Congress is doing too little to address housing affordability at the national level.

NAHB Chairman Carl Harris emphasizes that many Americans are calling on policymakers to act now, highlighting the need for policy reforms to stimulate construction and provide more homeownership and rental opportunities for citizens.

Housing costs weigh heavily on the typical American family

The NAHB/Wells Fargo Cost of Housing Index (CHI) provides a quarterly snapshot of housing affordability, showing the percentage of a typical family’s pre-tax income required to cover a mortgage on a median-priced home. A recent CHI reading of 41% underscores the financial strain many American families face, dedicating a significant portion of their income to housing. This index, alongside metro and low-income level analyses, offers crucial insights into the disparities and challenges in housing affordability across the United States.

Three levels of data are examined within the CHI:

  • National-level CHI is tracked for both new and existing homes
  • Metro-level CHI is tracked for existing homes in 176 metropolitan areas
  • Low-income CHI is calculated to examine the cost of housing for people earning 50% of the area’s median income.

Diverging trends in single-family and multifamily housing production

The latest data from the NAHB Home Building Geography Index (HBGI) for the first quarter of 2024 highlights a split in the housing production landscape. While single-family permit growth is on the rise across all geographical areas, driven by a shortage of existing inventory and pent-up demand, the multifamily sector is experiencing a downturn. This divergence marks a notable shift in market dynamics, with all regions reporting year-over-year growth in single-family construction for the first time since early 2021. The highest growth was in large metro-core counties at 13.5% while the smallest was in micro counties, at 1.5%, indicating a potential easing of the affordability crisis through increased supply.

Supply-demand pressures impact on market

The current affordability crisis in the US housing market demands a multifaceted approach. In the framing lumber markets, activity is slow as buyers opt for small, quick shipments and producers are selectively fulfilling based on their inventory levels. This cautious approach has led to an oversupply in the Southern Pine region, resulting in a saturated market. In contrast, sales of Western S-P-F lumber continue to underperform.

Similarly, structural panel prices have declined due to weak sales. The demand for OSB remains sluggish with increasing mill offerings. Meanwhile, Southern Pine plywood experienced modest late trading, extending producer orders into late June. However, both Western Fir and Canadian plywood markets have not seen changes in trading ranges, with buyer interest remaining low.

This situation highlights the intricate dynamics of raw materials and price movements within the housing market, underscoring the need for a nuanced approach to address the affordability crisis.

Solutions for navigating the US housing market

The unprecedented volatility in wood product prices underscores the importance of accurate, real-time price data and in-depth market forecasts for buyers and developers to stay competitive. In the complex US housing market, informed decision-making and strategic planning are crucial to uncover investment opportunities and address the pressing demand for affordable housing, shaping a future where housing is accessible to all.

Fastmarkets offers comprehensive price data and forecasts tailored to the US housing market, providing the insights needed to make informed decisions in these uncertain times. Explore our raw material price data options to stay ahead in the rapidly changing landscape of US home construction. Learn more.

What to read next
You can read a snippet of our weekly lumber report, featuring insights into the trends behind the continued increase in prices.
Watch this interview with Fastmarkets' in-house expert, Jennifer Coskren, director of wood products and timber, to learn more about the state of the US housing market and a look ahead to 2025.
Fastmarkets has corrected its FP-LBR-0395, LANL, KD SYP (west) 2 2×6 22-foot, which was published incorrectly on November 14, 2024. The error has been corrected. The correct value is below: FP-LBR-0395 LANL           $780 For comments and queries, please send email to: pricing@fastmarkets.com. This price is part of the Fastmarkets softwood products package. For more information […]
The postponement will now be voted on by both the Parliament and the Council.
Our insightful webinar on the recovered paper (RCP) industry in North America includes insights on changing dynamics between producers and developments among suppliers, as well as expert analysis on how these are impacting the market more widely. For those who missed it, here's a breakdown of the key takeaways.
Fastmarkets advises that, as of Monday November 11, certain monthly North American ferrous scrap assessments are yet to settle.