By David Pendered
With lumber prices nearly tripling since April, the nationwide rise in home prices was expected in the Beige Book report of economic conditions released Wednesday by the Federal Reserve.
Rising lumber prices added more than $16,000 to the price of a typical house, and $6,100 to the price of an average apartment, during a run-up on lumber prices that exceeded 170% from April to mid September, according to a report by the National Association of Home Builders.
Only now are lumber prices beginning to ebb. Import duties of up to 24% on Canadian lumber are to be reduced to 8% by court order in November. Demand is softening, as do-it-yourselfers have gotten it done, and the winter slowdown in house construction begins in portions of the country, according to a report by forbes.com.
The bite inflicted by the price hike in lumber and other commodities showed up in the Beige Book, the national economic report conducted eight times a year by the Federal Reserve. The book is an anecdotal report from bankers and business leaders in each of the 12 Fed districts.
All but one of the 12 Fed districts reported much the same thing with housing since the Sept. 2 report – prices are up and supply is scant. New York was the only district to report a general abundance of housing and falling prices. Residents are leaving in droves, and not just because of the pandemic.
The Empire State exodus started in 2010 with middle-class workers and high-income earners, state lawmakers reported in January. The pandemic worsened the flight, with New York City residents heading to less densely populated areas and prompting Gov. Andrew Cuomo in August to urge city residents to return and resume paying city and states taxes, according to a report by thehill.com.
In the Atlanta District, residential construction was not keeping pace with demand across the district that includes Alabama, Florida and Georgia, and parts of Louisiana, Mississippi and Tennessee. The report observed:
- “Demand for housing continued to recover, and new home construction continued to fall short of demand. Inventory levels of existing homes dropped to historic lows and shortages are expected to remain a long-term market headwind. Limited supply and rising construction costs have led to increased upward pressure on prices.”
The New York Fed covers the state of New York; northern New Jersey; one county in Connecticut; and Puerto Rico and the U.S. Virgin Islands. Of housing, the New York Fed observed:
- “New York City’s sales and rental markets have continued to weaken, while markets elsewhere—particularly for single-family homes—have been increasingly robust. New York City’s rental vacancy rate has surged to a multi-decade high, and rents have fallen by roughly 10 percent from pre-pandemic levels, as landlord concessions have become more common…. Sales of Manhattan condos and co-ops have been sluggish and running nearly 50 percent lower than a year earlier, while the listing inventory has risen sharply….”
The Atlanta Fed’s snapshot of the overall economy showed a region holding its own during the pandemic. This is the entire section on the regional summary of economic activity:
- “Economic conditions in the Sixth District improved slightly over the reporting period but remained below pre-COVID-19 levels. Labor market activity improved modestly as employers continued to add to payrolls. Nonlabor costs remained generally muted, but costs related to construction and COVID-19 safety measures continued to rise.
- “Retail sales grew but largely remained below year-earlier levels.
- “Softness in tourism and hospitality persisted as COVID-19 restrictions continued to limit activity in many parts of the District.
- “Residential real estate demand and home prices increased while inventory levels remained tight. Commercial real estate activity stabilized.
- “Manufacturing activity increased and new orders and production levels rose.
- “Banking conditions stabilized, and loan loss reserves continued to grow.”