The RoMac Whole House Commodity Index jumped again in mid-February by 7.5% m/m to $64,079, a new record. The spread of price pressures beyond lumber is indicative of the supply constraints facing US housing. The GDP deflator for residential investment rose 13.2% y/y in Q4 2021, an all-time high.
The final demand construction PPI jumped 3.6% m/m at the start of 2022 too: the y/y accelerated to 16.1%. The new warehouse building PPI was up 27.8% y/y.
Real investment in warehouses has doubled in real terms since Q4 2005. But available logistics space is plummeting. The shortage is compounded by Amazon and private equity firms buying up warehousing space and subsequently pushing up the price of rents.
Labour shortages and the rise in raw materials costs have hampered new housing starts as well. New privately-owned housing units under construction totalled 1.543 million at the start of 2022, above the ‘subprime’ peak of 1.424 million in January 2006.
Some argue that the record housing stock due to eventually come onto the market will push down house prices and rents. But the housing supply gap is much larger (between 5.8 million and 6.8 million units according to separate estimates). There will be no quick, easy fix to the housing supply gap.
According to the January existing home sales report, total housing inventory fell to a new low of 1.02 million (seasonally adjusted). The m/m increase in the median price of existing homes sold firmed from 1.05% to 1.83%. The y/y accelerated once again, from 14.7% to 15.4%.
