The cost index for ‘goods inputs into construction’ is now racing ahead at its fastest rate since September 2008’s +12.4%. But that elevated rate of +12.4% a decade ago resulted from an artificial boom in homebuilding that was fueled by faulty subprime mortgage lending.
Economist John Burns of John Burns Real Estate Consulting, recently shared his predictions on a rise in household formation between 2016 to 2025 that, according to his analysis, will require 1.25 million housing units to be constructed per year to accommodate it.
It is becoming easier to kick start this whole home construction process and obtain AD&C loans. This upward trend in lending provides a meaningful window into future housing start trends, and thus, demand for structural building components.
Recent earnings reports from public builders like D.R. Horton, Meritage and Tripointe (as examples) make it clear homebuilders are not struggling to make a profit even as labor and building material prices have risen sharply.