SCOTT SIMON, HOST:
The economic uncertainties in the U.S. make it a challenging time for homebuilders, and that's discouraging in a country that needs more housing and where the ability to afford a house is out of reach for many. Laurel Wamsley covers housing for NPR and joins us now. Laurel, thanks so much for being with us.
LAUREL WAMSLEY, BYLINE: Hey, Scott.
SIMON: What are you seeing in the data you follow?
WAMSLEY: Well, it doesn't look good. Construction of single-family homes dropped in April, according to figures from the Census Bureau. Every indicator - building permits, starts of new homes and completions - was down compared to a year ago. And some of these are indicators that stretch into the future. A lack of permits now can mean fewer homes hitting the market down the road.
SIMON: What's behind the slowdown?
WAMSLEY: Well, it's really a combination of factors. The first issue is demand. Lots of Americans would love to buy a home, but they simply can't afford to. Home prices are up nearly 50% since before the pandemic, and mortgage rates are now close to 7%. And then there's supply. I called up Robert Dietz. He's the chief economist at the National Association of Home Builders.
ROBERT DIETZ: The tariff debate has created a lot of uncertainty.
WAMSLEY: He said three-quarters of builders in their monthly survey said they're struggling to figure out the pricing on their homes. They don't know how much it'll cost to build them, and then they don't know how much they're going to be able to sell them for. And when the costs are growing but builders can't raise their prices, housing production slows down.
SIMON: You mentioned tariffs, Laurel. How are they affecting home building?
WAMSLEY: Well, Dietz told me that they're really starting to add up.
DIETZ: The average impact, thus far, is close to $11,000 per single-family home.
WAMSLEY: One of the big issues, he said, is Canadian lumber.
DIETZ: Wood-framed homes represent about 90% of single-family homebuilding, and about a quarter of softwood lumber that we use comes from Canada.
WAMSLEY: Now, there's currently a 14.5% duty on that Canadian lumber, but it could go up to 34% by the end of the summer.
SIMON: And how do homebuilders feel about that?
WAMSLEY: Not good, Scott. The Home Builders Association does a monthly survey of builder sentiment, and in May, it was the lowest it's been in a year and a half. Part of the issue is that there are more homes for sale right now. More inventory means it could be harder to sell the new homes that they build, and they'll have to cut prices. Now, interestingly, part of the market that has remained strong is the build-for-rent sector.
SIMON: These are houses that are built to be rented, not to be sold.
WAMSLEY: That's right. With all this uncertainty in the economy and high home prices, there's a lot of demand for rentals. And Dietz says that these days, about 10% of single-family home construction is built to rent, and builders also have the ability to pivot. Homes that they planned on selling, they could hold onto and rent out instead.
SIMON: Let's talk about home sales, though, for a moment. What's happening there?
WAMSLEY: Well, overall, it's in a slump. New numbers came out this week for existing home sales showed that it was the slowest April in 16 years. And for new homes, sales so far this year are down about 1% compared to last year. Now, what's happening here is that many would-be buyers are finding reasons to wait. One of them is 32-year-old Kassandra Ford, a biology professor. Now, she and her mom had planned to buy a home together after her mom sold her house this spring in South Carolina, where they found that the market was slow.
KASSANDRA FORD: Her house, it took about 3 1/2 months to sell.
WAMSLEY: But then they were trying to buy in the Midwest - the one region where sales climbed last month. In the Twin Cities, where Ford lives, she and her mom ran into competition. After getting outbid twice, they decided to take a beat.
FORD: I'm keeping an eye on Zillow, but unlike before, when I was probably looking every day, now it's maybe once or twice a week. It feels very much like we're in a holding pattern.
WAMSLEY: She resigned the lease on her apartment, and her mom moved in with her. So right now, there are a lot of people who could buy, but there's a lot to discourage them. So many are deciding, in this economy, to wait and see.
SIMON: NPR's Laurel Wamsley. Thanks so much.
WAMSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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