“If there’s one thing that’s certain in business, it’s uncertainty.” —Stephen Covey
As we approach spring, professionals in the construction and lumber sectors find themselves in familiar territory. Cautious optimism inspired by slight improvements in data are overshadowed by pressures from several directions. Here’s what the latest indicators reveal about current trends and future possibilities.
National Trends: Continued Mixed Signals
Nationally, single-family (SF) starts rose 11% month-over-month but remained slightly down by just over 2% compared to last year. Permit activity, however, remained flat month over month and dipped slightly over 3% year over year. This points to moderate short-term momentum but signals potential slowdowns in new project pipelines.
According to Jing Fu, NAHB’s senior director of forecasting and analysis, the industry remains cautious. Fu notes, “Despite elevated interest rates and policy uncertainty, ongoing lean levels of single-family existing home inventory helped to boost single-family production in February. NAHB forecasts that single-family starts will remain effectively flat in 2025 as prospects of a better regulatory business climate are offset by uncertainty on the tariff front.” Belco leadership has been exploring the complexities of inconsistent potential tariff policy, the impact of upscaling domestic logging, labor shortages and more.
Regional Spotlight: Cautious Gains Across the Map
South: Momentum Slows
The South experienced month-over-month growth in seasonally adjusted starts and permits. However, both metrics dropped significantly year over year. The actual monthly data confirms a downward trend, signaling lower overall activity compared to 2024 levels.
West: Starts Strong, Permits Slowing
The West saw a slight month-over-month increase in SAAR starts (up 1%) and an impressive 20% rise year over year. Permit activity, however, declined in both periods. This mixed performance suggests robust near-term activity but possible declines ahead as fewer new projects enter the pipeline.
Builder Confidence Declines Further
Builder confidence fell again nationally, hitting a reading of 39, the lowest since August 2024. The South dropped to 39 (a 3-point decrease), while the West declined slightly to 34. Key metrics from the NAHB highlight this concern:
- Current sales conditions dropped to 43 (down 3 points)
- Future sales expectations remained flat
- Traffic from prospective buyers fell sharply to 24 (down 5 points)
According to LBM Journal, elevated material costs and tariff uncertainty significantly hinders builders. Tariffs alone add approximately $9,200 to $10,000 per home, intensifying affordability and construction pressures.
Housing Affordability Remains a Critical Issue
The New Home Median Price increased by approximately 2.5% in January, though still slightly below last year’s levels. Existing home prices continued their decline but remained nearly 4% higher year over year. The Case-Shiller US National Home Price Index edged upward slightly to 323.538, reflecting a modest recovery driven by flattening mortgage rates, currently averaging around 6.65%.
Looking Ahead: Modest Growth Anticipated
Revised forecasts from NAHB now project single-family starts at 1,021,000, marking a slight 0.87% improvement from earlier predictions. Multifamily forecasts also increased marginally. Single-family construction still comprises over 75% of anticipated starts, reinforcing its importance to overall market performance.
Final Thoughts: Facing Industry Headwinds with Resilience
NAHB Chairman Buddy Hughes recently summarized key industry pressures as the “5 Ls—lending, labor, lumber, lots, and laws”:
- Tightening credit conditions
- Over 200,000 unfilled construction jobs
- Construction material costs up 34% since December 2020
- Limited lot availability due to zoning and land-use regulations
- Regulatory costs consuming approximately 25% of new home prices
With a current housing shortfall of approximately 1.5 million units, NAHB continues advocating for legislative relief. Tariff concerns further complicate the industry’s path to recovery.
Despite challenges, total market performance remains slightly ahead of 2019 levels. Julie Bradley-Rowan, Belco’s Senior. Business Analyst says, “While we have a lot to navigate, combining our overarching macro data with real time activity and happenings relevant territories will help us make the best decisions we can to be successful during these uncertain times.” In times like these, Belco’s focus on clarity, collaboration, and customer success makes all the difference.
