Do you remember during the COVID-19 pandemic when there were rampant shortages, off and on, of different types of foods, dry goods, building supplies, baby formula, new cars and such? Did you dare travel during those years and find that gasoline, airfare and hotel prices were nuts?
When it came to foodstuffs, manufacturers adjusted quickly by sometimes raising prices due to lack of ingredients and decreasing the size of the final product. As an example, Snickers bars downsized from 50 grams to 44 grams—equal to about one fewer bite per bar—but they kept prices the same. During the same time, we heard how lumber and plywood nearly quadrupled in cost. Wholesale prices for plywood increased from $400 to $1500 per thousand square feet, with average retails prices that increased from $12.80 to $48.00 per sheet.
Well, the pandemic is largely over and the supply chain has improved across the country. The National Association of Home Builders estimates that 9 out of 10 single-family homes built in the U.S. feature wood-framed walls, ceilings, floors and roofs.
The prices of new homes haven't dropped since those masked-up days, even though lumber prices have fallen. But what has happened is that many builders around the country are doing the same thing as Snickers manufacturer Mars Inc.—decreasing the size of new homes. On average, the Builders group has seen a 2% decrease in new home sizes across the country, its own form of "shrinkflation."
The U.S. Census Bureau and HUD's August housing report for the country found that housing permits were up 0.1% in June but are still 13% below last June's numbers in 2022. Housing stats in July were up 3.9%.
As a nation, we aren't keeping up with housing demand and statistics also point to a continuing lack of affordable homes being built to fulfill the needs of first-time buyers and seniors who want to downsize. Current homeowners don't want to give up mortgages they got during the pandemic—with annual interest rates of 2.5% to 3%—and this fact alone is keeping housing inventory low nationwide.
The National Association of Realtors reported last month that the U.S. housing market is short more than 300,000 affordable homes for middle-income buyers. They found that middle-income buyers can afford to buy less than a quarter (23%) of the listings that are currently being offered for sale around the country. That's a lot different from five years ago when those same buyers could afford to purchase roughly half of the homes on the market.
As a side note, the Census Bureau report found that Salt Lake County single-family home prices increased by almost 60% during the pandemic and that we had a huge population increase during the pandemic. More than 23,000 folks from California moved to Utah, which is three times more people than the next largest group of immigrants—8,300 from Arizona.