75% of real estate purchases have competing offers in Salt Lake

The housing market is frustrating buyers. Values are escalating so fast; it is leaving many priced out of the market. Salt Lake leads all metros with the highest percent of offers facing competition. Most of the frustration is pointed to supply, which then lands in the lap of builders.

Are the home builder's to blame for the housing shortage, high prices, or delays currently existing in new construction? No, they too are frustrated as many ordinary business operations have reached historic highs and are out of their control.

Let's take lumber as an example. Under regular construction schedules, the framing and finish carpentry can be planned and without much difficulty. Today, demand has outpaced supply to the point that builders are caught with unfilled orders, and many don't know when lumber will be delivered. Also, lumber prices are fluctuating so quickly—no one has been able to keep up with the rising cost. Imagine the frustration among builders and buyers not knowing costs or completion times.

When will this end? To answer this question, we first need to look at what has created the supply shortages, which have caused the high prices. Construction slowed at the beginning of the pandemic as communities began dealing with the unknown, restricting residents' with stay-at-home guidelines. Initially, the lumber supply increased, leaving mills and lumber yards with excess materials. Lumber prices fell accordingly.

As the COVID-19 guidance restricted workers, the mills with excess material willingly pulled back employees as their production wasn't needed at the time. When construction was listed as an essential business, allowing contractors to go back to work, the housing construction picked back up. It came so quickly news reported the increases as "housing starts surging." June increased 17%, July grew by an additional 23%, both months well above market forecasts.

The housing production surge came just as those who were homebound decided to remodel. You might remember the lines out the doors of the home improvement stores! Big-box stores revenues set records during this time, and profit margins grew as lumber flew out the doors.

Meanwhile, the high production mills were left without needed workers as they reside mainly in states where the restrictions were the most serve and remain restricted today. The high costs brought in market speculators, putting more pressure on the lumber industry. The price increases were happening so quickly, with each setting new record highs, no one could estimate what would happen.

We know the shortage will end when the equilibrium between supply and demand settles. The timeline will shorten as the Home Builders Association continues offering solutions where the government can assist. One thing is for sure- lumber chains will catch up, and demand created by the pandemic for do-it-yourself remodeling will slow as restrictions continue to allow employees to go back to work.