It’s often been said that the key to ending America’s home affordability crisis is to build more homes. Yet home building remained sluggish last year and well below the pace needed to dent a national housing shortage.
Robert Dietz, chief economist for the National Association of Home Builders, spoke with Scotsman Guide last week about the outlook for home building. He discussed a range of issues, including the proper role of the federal government in encouraging home construction, regional building trends, the remodeling market and the potential impact on the costs of building of a trade war with Canada. Note that the interview has been edited for length.
How are builders feeling about the housing market post-election?
Single-family construction builder confidence is pretty close to neutral. Look, there’s some concerns and there’s some real possibilities on the positive side. Builders are looking forward to an improved regulatory environment not just at the federal level, but state and local governments making improvements that are going to reduce the cost of land development and single-family building. There are some concerns about tariffs.
Is there a target number for new-home construction that would be great for the housing market?

Over the next four or five years, [we need] about 1.2 million single-family homes a year. When you get to that level, you’re definitely reducing the housing deficit. That deficit right now with single family and multifamily combined is about a million and a half homes. I have been critical of some of the larger estimates that say [there’s a shortage of] 4 million or more. I think those numbers are much too large. The problem is that in 2025, we’re likely to see a very slight gain. It’s going to take a little while to get up to that pace.
I’ve been told that home building varies widely by region and there’s been construction in places like Texas and Florida, but you also have to look at what’s being built. And what I was told was that new homes under construction tend to be large houses. They’re not starter homes. They’re not something that the first-time homebuyer could typically afford.
There’s a broad geographic distribution and variability of home construction. More than half of single-family home building occurs in the South. When you look at the top 10 markets for single-family building in 2024, New York, New Jersey metropolitan areas are on there, Phoenix is on there, but the rest of the areas are Texas and markets in the Southeast including markets in Florida and North Carolina. And that reflects the population growth trends.
With respect to size, we’re not building enough starter homes. Part of the problem is land development rules and zoning rules. It’s more expensive on a per-square-foot basis to build a smaller house. However, if you look at new home size data, median new construction home sizes have been falling for about a decade.
You mentioned tariffs earlier. Where do building material costs stand now and how might they be affected by a trade war with Canada?
So, overall building material costs are up about 30% in aggregate from where they were, say at the start of 2000. So just like everything else in the economy, there’s been this burst of inflation. Those costs are not going to roll back.
Lumber has seen a lot of variability. Lumber pricing right now is a little bit above $400 per thousand board feet. Actually, I think it’s closer to $440 per thousand board feet. It was at $350 back in April 2020. And in 2021 it peaked above $1,500 per thousand board feet. So, that market has experienced a lot of volatility.
Roughly a third of the lumber is imported, the vast majority of that coming from Canada. There’s already a 14% effective duty rate on Canadian lumber, and President Trump has talked about imposing across-the-board 25% tariff on all goods coming from Canada and Mexico. So presumably that would sit on top of [the existing tariff of] 14%. We’re making the case that if you increase the cost of lumber, you’re going to make building affordable and attainable housing more expensive, whether it’s multifamily, single-family or remodeling.
Speaking of remodeling, where do you see that market going?
I’m really bullish on the remodeling and the repair market. I know there have been some analysts in the industry over the last couple of years who have actually had a fairly negative forecast. I think those have proven wrong. In our quarterly surveys of remodelers, they have never stopped being positive.
And it’s for reasons like what you identified that the demand for remodeling is strong because homeowners have more than $30 trillion in home equity. There’s an aging housing stock that is ripe for reinvestment. And, of course, there’s both policy and consumer interest in making the existing housing stock more resilient and more energy efficient.
As you mentioned, home building depends heavily on local conditions, local codes, the zoning and things like that. But putting that all aside, is there something that the federal government can do?
Sure. The challenge of housing costs is a supply-side issue. It is a lack of supply. And it’s these limiting factors, I call them the five Ls: labor, lots, lending, lumber materials and laws.
It’s really important for people to understand that if you’re listening to an analyst or a policymaker or researcher, and they’re preaching that if you fix one thing in the housing market on the supply side that you’re going to fix the market, that’s false.
There’s no simple, single, scalable solution. And so, we need to make progress, whether it’s at the federal level, making sure that funds are available for workforce development, evaluating regulatory rules that exist at the national level, things like the Waters of the United States [environmental] rule that governs what kind of land can be developed and at what cost.
Utilizing the national housing finance system as a code-making organization or code-determining body is a regulatory burden that causes harm to the industry. So, looking at those kinds of things, I would say do no harm. I’m not a big fan of tariffs. We’ve got to watch what the impacts that tariffs could have on the cost of building materials.
There are ways for the federal government to potentially incentivize state and local governments to improve those policies that are rightly determined at the state and local level, such as zoning rules. There are a lot of community development and block grant financing, transportation financing and infrastructure financing that comes from the federal government potentially.
Author
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Victor Whitman is a contributing writer for Scotsman Guide and a former editor of the publication’s commercial magazine.