Welcome to today’s roundup of real estate news, where we delve into the latest developments affecting the housing market. From the recent uptick in framing lumber prices to the ongoing challenges in Minnesota’s real estate market, and the impact of local infrastructure on emergency services in Minneapolis, our coverage spans a range of critical topics. Additionally, we explore how new financing initiatives in Willmar are set to address affordable housing needs. Stay informed with our comprehensive analysis and expert insights as we navigate these dynamic market conditions.
Framing Lumber Prices | NAHB
The framing lumber composite price rose (0.6%) during the week ending July 19. It was the first weekly increase in several weeks, after dropping the previous week to its lowest price since April 2020. NAHB continually tracks the latest lumber prices and futures prices, and provides an overview of the behaviors within the U.S. framing lumber market. The information is sourced each week using the Random Lengths framing lumber composite price which is comprised using prices from the highest volume-producing regions of the U.S. and Canada. A summary of other wood prices, including plywood prices, is included below.
Summary of the week-to-week lumber prices and plywood prices for the week ending July 19, 2024:
Softwood lumber prices have been especially volatile in recent years largely because of increased demand, rising tariffs, supply-chain bottlenecks and insufficient domestic production. To address the high prices for lumber, NAHB has advocated for the following actions:
In addition to narrowly defined framing lumber, products such as plywood, OSB, particleboard, fiberboard, shakes and shingles make up a considerable portion of the total materials (and cost) of a new home.
Surveys conducted by Home Innovation Research Labs show that the average new single-family home uses more than 2,200 square feet of softwood plywood, and more than 6,800 of OSB, in addition to roughly 15,000 board feet of framing lumber. Softwood lumber is also an input into certain manufactured products used in residential construction — especially cabinets, windows, doors and trusses.
To account for the manufacturer’s margin, sawmill prices for the lumber embodied in these products are marked up by the percent difference between receipts and cost of goods in the “wood product manufacturing” industry, as reported in the IRS Returns of Active Corporations tables.
Final pricing for home buyers is somewhat higher because of factors such as interest on construction loans, brokers’ fees, and margins required to attract capital and get construction loans underwritten. As explained in NAHB’s study on regulatory costs, for items used during the construction process, the final home price will increase by nearly 15% above the builder’s cost.
The bottom line is that changes in softwood lumber prices directly impact the price of a new home. This, along with rising wages for construction workers and higher interest rates, is one of the reasons the housing market is experiencing declining affordability.
Homebuilders and remodelers begin to get price relief once mill prices have substantially decreased for an extended period and/or stabilized. Note that large price decreases alone may not be sufficient. Prices must fall for long enough periods of time to sufficiently lower a supplier’s average costs after a run-up.
Depending on the rate and consistency of price decreases and whether prices have stabilized at the lower level, it may take at least a few weeks to a couple of months for builders to see price relief on the order initially reported in the lumber futures or cash markets.
The length of this “waiting period” for lumber price reductions varies with builder size, supplier size, and the specific builder-supplier relationship. Buying power is positively correlated with the size of a residential construction firm, while the same is typically true for suppliers’ selling power. The relative difference in market power between the buyer and seller is crucial in determining how quickly lower prices transmit to a customer.
In contrast to the dynamics of an environment with falling prices, higher prices reach builders much more quickly when market prices are increasing. The same forces that lead to large lags relative to mill prices on the way down can help explain why builders’ lumber costs may increase contemporaneously with mill prices.
Wholesalers tend to be “trigger happy” when prices skyrocket. As the cost of their inventory is low relative to cash prices during these periods, they will quote at or near current market prices. The environment is one in which wholesalers are assured to buy low and sell high.
However, wholesalers cannot predict when a bull market is going to end and buy their lumber according to how likely they believe it will last. As different buyers may have different forecasts, disparities in purchasing behavior can arise. A wholesaler who assumes lumber prices will keep rising for two months will buy more inventory than one assuming the run will last for only two weeks.
Retailers generally have less buying power than wholesalers have selling power. In such a scenario, the retailer (e.g., lumberyard) is said to be a “price taker.” As a result, their inventory costs tend to increase in step with market prices.
These higher costs are passed on to builders in order to maintain positive operating margins. This is why lumber retailers are less likely than wholesalers to realize outsized profits when prices are rising.
The analysis above was authored by Jesse Wade, NAHB director of tax and trade policy analysis. Mr. Wade has expertise in tracking and analyzing short- and long-term trends in commodities pricing, particularly for framing lumber, steel, gypsum and other common building material products used in residential construction.
Tackling the affordability crisis and the key issues that must be addressed to ensure a robust housing market.
Prices reach record highs | News | pinecountynews.com
According to new data from Minnesota Realtors®, both buyer and seller activity were down compared to June of 2023, while prices and market times rose.
Market Activity
With half of 2024 behind us, it’s a good time to take a step back and review year-to-date activity. Through the first six months of 2024, new listings have increased by 8.8%, and closed sales have risen by 3.4% statewide compared to the same period last year. This indicates that seller activity has increased at more than twice the rate of buyer activity. Consequently, more supply is entering the market relative to demand, part of a continuing trend. Year-over-year inventory has grown for 11 consecutive months. In June, the number of homes for sale was up 11% to 14,648 active listings––that’s how many properties are available on which buyers can write offers. While buyers will appreciate the extra 1,500 homes to choose from, there are still only 2.6 months of supply, signaling that Minnesota continues to be a seller’s market.
Home buyers came into 2024 largely optimistic about lower mortgage rates. But that hasn’t materialized, due to stronger than expected economic growth as well as stubborn inflation numbers. Some buyers are postponing purchase decisions due to these low affordability factors. Despite some shrinking demand, prices aren’t likely to soften due to the persistent and long-running inventory shortage. After more than a decade of underbuilding, there simply aren’t enough homes to meet demand. If and when interest rates settle, home buyers will likely face stiff competition from others who were locked out of the market during the post-pandemic buying frenzy.
The typical sales price was up 1.4% while days on the market increased 10%. That was both the smallest increase in median price and the largest increase in market times since last July. On average, sellers accepted 99.4% of their list price, which is down from last June but on-par with 2018-2020 levels. “While many buyers and sellers have found success, others have been frustrated by this spring market,” said Geri Theis, President of Minnesota Realtors®. “There are some encouraging signs that rates could decrease yet this year, and we’ve already seen more supply become available. Affordability remains a key challenge for buyers, and for sellers who turn around to become buyers.”
Regional Dynamics
Market activity always varies across areas, price points, and property types. Alexandria and Grand Rapids were the only areas with more new listings than last year. Pending sales were down across the board; sales in the Grand Rapids region were essentially flat. Home prices rose the most in the Willmar, St. Cloud, and Rochester regions. The largest price declines took place in the Detroit Lakes and Alexandria areas. The most balanced markets were Detroit Lakes and Bemidji while the most undersupplied markets were Rochester, St. Cloud, and the Twin Cities metro.
Twin Cities Metro Overview
Home prices are higher in the metro, but homes are selling more quickly in greater Minnesota. Both new listings and sales slid less in the metro compared to statewide. Twin Cities home sellers accepted 100.1% of their list price in 34 days compared to 99.4% in 33 days statewide. The metro had 2.4 months of supply while there were 2.6 months of inventory statewide. As has been the case, those shopping for homes face the twin hurdles of undersupply and lack of affordability. These headwinds are impacting virtually every county, city, and neighborhood across the state. Yet there are some hopeful signs of relief when it comes to easing interest rates and more inventory in the months ahead.
Stephanie Teig is the Senior Vice President of Marketing and Communications for Minnesota Realtors.
Disabled hydrants, Lake Street construction hamper Uptown Minneapolis house fire fight – CBS Minnesota
Minneapolis Fire Department crews had a difficult time finding working hydrants to keep a large house fire from spreading early Wednesday morning in Uptown. Crews were called out to a house off James Avenue South and West Lake Street at about midnight, just east of Bde Maka Ska. Deputy Chief Rita Juran says firefighters found flames on the second and third floor. She says the only person who lived in the house got out safely.
Juran says crews kept the flames from spreading to surrounding buildings, but it wasn’t easy because of all the construction in Uptown. “We’ve got fire hydrants all the way up and down Lake Street that are shut off, so our crews who are trying to hook up water for our aerial ladder were looking for hydrants, all of them shut off,” Juran said. “We had to bump out to Lagoon in order to find a hydrant that would work. We’re also having water pressure issues, however the crews made it work here. They did an awesome job with an aggressive attack.”
Chief Bryan Tyner says the situation is one his crews will just have to deal with for the time being. “This is something you have to do. The water lines have to be maintained. If not, you have burst water mains and things like that, which we’ve seen from time to time, or where water goes bad and you have bad water,” Tyner said.
Neighbors they’ve gotten notices their water would be shut off multiple times. However, neighbor Isaiah Sullivan says this was the most unfortunate time for the water to be off. “I get that we need infrastructure change, and need to rebuild these streets and do what we can to make sure we’re not dealing with major problems down the road,” Sullivan said. “But this is becoming a major problem right now. It’s affecting a resident and a business by their house burning down.”
“It wasn’t even a thing that crossed my mind until last night. I didn’t think for one second that it was going to be a problem to get a fire truck in, or an ambulance, but that’s what crosses your mind now,” Sullivan continued.
Investigators are still working to determine the cause of the fire.
The WCCO Staff is a group of experienced journalists who bring you the content on WCCO.com.
Financing OK’d for Trident project also aids affordable housing in Willmar, Minnesota – West Central Tribune | News, weather, sports from Willmar Minnesota
The Willmar City Council on Monday, following a public hearing, approved the creation of a tax increment financing district for Trident Development’s senior housing project. The TIF district will also implement a new tool that will assist the city in providing for additional affordable housing needs throughout the city.
Trident Development is proposing the construction of Waterview Senior Housing to be located at 2001 Ninth St. S.E. Tax increment financing is a tool that communities use to capture a portion of the property taxes above the current value that results from a new development or redevelopment project. That portion of the taxes may be used toward development costs.
In this case, the city would retain 20% of the additional property tax revenue created by the new development to create the new housing initiative, and Trident Development would be reimbursed 80% annually to address an estimated $2.5 million funding gap for the $22.3 million senior housing project.
Throughout the life of the tax increment financing agreement, at least 20% of the housing units in the 75-unit Waterview Senior Housing development must be reserved for people whose annual income is no more than 50% of the area median income.
Using the new tool, the city will generate approximately $760,000, roughly $30,000 per year, for the housing initiative fund, according to Corbett. Details of the program and the application process are yet to be determined, but it can assist in funding the acquisition of housing, construction of housing, site improvements, or any expenses traditionally financed with housing tax increment dollars.
The Waterview Senior Housing development is planned to include 61 assisted living units and 14 memory care units, providing health, housekeeping, and food services for residents, as well as a beauty salon. Construction is expected to begin in late 2024 and be completed sometime in early to mid-2026, according to Fink.