Steel Markets

New Home Sales Surge in March but Builders Worried About Lumber Tariffs

April 25, 2017

New home sales reached an 8-month high as the spring season brought out new buyers. Sales of new single-family homes rose 5.8 percent to a seasonally adjusted annual rate of 621,000 in March. The rate is 15.6 percent above the March 2016 estimate, according to the US Census Bureau and Department of Housing and Urban Development.

The South led home sales with sales of 323,000 followed by the West at 175,000. Sales dropped off in the Midwest, declining 4.5 percent from the previous month to 84,000 units. Sales totaled 39,000 in the Northeast for a 25.6 percent jump after falling 24.4 percent in February. On a year-over-year basis, sales improved by double digits everywhere except the South where sales were 5.9 percent higher than March 2016.

Median sales price was $315,100 and the average sales price was $388,200.

An estimated 268,000 homes were for sale at the end of March, representing a supply of 5.2 months at the current sales rate—six months is considered a healthy supply to meet demand. Month’s supply was 3.7 percent lower that February’s supply and down 5.5 percent from March 2016.

Lumber Tariff Threatens Housing Industry

The surge in sales coincide with an announcement by the Administration that it will slap tariffs of 20 percent on lumber sourced from Canada. The U.S. is Canada’s biggest customer of lumber used for housing construction. The U.S. imports 33 percent of the lumber used with 95 percent coming from Canada. The tariff is expected to push lumber prices up and threaten Canadian jobs.

In a press release from the United Steelworkers, USW National Director for Canada Ken Neumann called the tariffs an attack and said working families must be a top priority “not made the last thing governments think about in trade disputes.”

Neumann said decisive action is needed and called for Canada to immediately apply an equivalent tax on unprocessed logs exported to the U.S.

United Steelworkers International President Leo Gerard said, “The United Steelworkers sees Tuesday’s announcement as a direct attack on our Canadian industry, and more broadly on the trade relationship between our two countries. We will be mobilizing both our Washington and Ottawa bureaus to defend Canadian workers.”

“This month’s increase in new home sales is aligned with solid builder confidence and shows that the spring home buying season is off to a strong start,” said Granger MacDonald, chairman of the National Association of Home Builders (NAHB). “However, builders are concerned that ongoing increases in building material costs will hurt housing affordability, especially given today’s proposal by the Department of Commerce to impose a hefty tariff on Canadian lumber.”

The National Association of Home Builders Chairman Granger MacDonald said in a press release, “NAHB is deeply disappointed in this short-sighted action by the U.S. Department of Commerce that will ultimately do nothing to resolve issues causing the U.S.-Canadian lumber trade dispute but will negatively harm American consumers and housing affordability.”

NAHB says it takes about 15,000 board feet to build a typical single-family home. The ten year trade agreement covering lumber imports from Canada expired at the end of 2016. Uncertainty about a new trade pact resulted in a 22 percent price increases in the first quarter of 2017, adding almost $3,600 to the price of a new home.

The Associated General Contractors of America said earlier this month that double-digit price increases on a variety of construction materials have pushed construction costs up in March; costs that contractors have not been able to pass on to clients. The Association urged policy makers “to avoid adopting restrictions on international trade that would add to materials costs and potentially drive up the price of infrastructure, buildings and new homes and apartments.”