More Americans are turning to remodeling their homes instead of building new ones despite lower lumber costs, an industry insider noted on “Varney & Co.” Friday.
Bryan Jaeger, owner of Jaeger Lumber & Supply Co. in New Jersey, provided the insight as the lumber market reels from rising inflation, which sits at a fresh 40-year high, and a slowdown in the housing market.
Lumber prices slipped Friday afternoon to around $585 per thousand board feet, down by about 60% from the high achieved in March of this year.
Lumber prices soared from the start of 2020 as COVID-19 caused supply chain bottlenecks and resulted in strong demand for building projects, including both home improvement and construction, as the ability to work from home led to the need for bigger houses.
Jaeger told FOX Business’ Madison Alworth during a live report that spec builders, who often take on projects that are speculative in nature, “have already started to pull back and they were pulling back in March when prices were peaking.”
“They were starting to take on more remodeling projects because once you talk about raising the interest rates, mortgage rates going up, that just changes the market,” he continued. “So out of uncertainty, they’ve pulled back into remodeling.”
U.S. home construction fell in June to the lowest rate since September, the latest sign that rising borrowing costs are starting to cool the red-hot housing market.
Housing starts dropped 2% last month to an annual rate of 1.559 million units, the lowest level since September 2021, according to new Commerce Department data released on Tuesday. That’s below Refinitiv economists’ forecast for a pace of 1.559 million units.
Applications to build – which measures future construction – slowed to an annual rate of 1.69 million units, which is also the lowest since September.
The data comes one day after the National Association of Home Builders/Wells Fargo Housing Market Index, which measures the pulse of the single-family housing market, fell for the seventh consecutive month to 55, the lowest level since May 2020. It is the second-largest one-month decline in the survey’s 37-year history.
While any reading above 50 is still considered positive, the index has fallen considerably from just one year ago, when it stood at 80. It peaked at a 35-year high of 90 in November 2020, buoyed by record-low interest rates at the same time that American homebuyers – flush with cash and eager for more space during the pandemic – started flocking to the suburbs.
Jaeger pointed to his own experience regarding lumber price trends, noting spec builders are “fewer and far between” in New Jersey because of less available land, but that “the lower prices are bringing some of the homeowners back in.”
“Everyone was spooked last year and early this year,” he continued, pointing out that in the spring prices were “sky-high” while people were dreaming about decks and other home projects.
“We’re at a low right now, but we’re already starting to come back up in pricing is what we’ve seen,” he added.
FOX Business’ Megan Henney contributed to this report.