The housing industry has been an economic bright spot during the COVID-19 pandemic for recyclers, even given the recent easing. While sale levels continue to be strong, the construction industry is experiencing a variety of pressures from inflation and supply chain disruptions to rising interest rates and affordability. The housing industry positively impacts the recycling industry as sales of new and existing houses shine a light on demand for recyclable materials.

In March 2022, sales of new single-family houses decreased 8.6 percent to an annual rate of 763,000 seasonally adjusted from the previous month’s revised rate of 835,000. Compared to March 2021, sales are down 12.6 percent, and compared to the first quarter of 2021, new single-family house sales are down 6.8 percent to 214,000 not seasonally adjusted.

The median sales price for March 2022 reached an all-time high of $436,700 not seasonally adjusted, an increase of 3.6 percent from February 2022 and 21.4 percent higher than March 2021. Two of the biggest contributing factors to the decreased new home sales and higher prices is inflationary pressures and rising interest rates.

On May 4, the Federal Reserve Board raised the Federal Funds Rate by 0.5%, the largest interest hike in more than two decades, as part of its efforts to curb high inflation. “The Fed raising interest rates increases the cost of borrowing to banks, and, in turn, means the banks are raising rates to consumers,” says Bret Biggers, ISRI’s senior economist. “Higher interest rates lead to affordability issues. Fewer people are able to buy their desired new or existing home because the increased interest cost makes the house unaffordable. This leaves the buyer with the decision to buy “less of a house” than they wanted or to stay out of the market.

While monthly single-family new house sales increased in the first quarter in the Northeast and West by 10.5 percent and 8.5 percent respectively, new house sales decreased in the South (-13.9%) and the Midwest (-9.2%). In March 2022, 43 percent of new single-family houses sold were between $200,000 to $399,999, down from 58 percent in March 2021. The $400,000 to $499,999 range decreased to 18 percent of houses sold, the same as a year ago. Houses $500,000 and over increased to 38 percent of houses sold, up 16 percent from March 2021.

“Many of the homes with price tags over $500,000 or $750,000 are custom houses. These houses are sold before they’re built. It’s the opposite of speculative building, where houses get built before they are sold,” Biggers says. From observing the market’s current trends, Biggers anticipates there will be less speculative houses built but custom houses will continue relatively unaffected. “People purchasing custom houses are typically less price sensitive,” he says.

Survey after survey, year after year, the number one reason holding people back from buying a house is the cost of the down payment, Biggers says. “People are determining if they should wait, or buy a smaller house or condo, that’s why multifamily units are rising, people are purchasing homes they can more easily afford.”

In March, U.S. housing starts rose by 0.3% month-on-month to 1.793 million units. The increase largely reflected gains in multifamily homes that rose by 4.6% month-on-month while single-family starts fell by 1.7% month-on-month. Multifamily housing also contributed to the 0.4% rise in March housing permits. Multifamily permits rose by 10.0% while single-family permits fell 4.8%.

Housing construction remained strong in March which is a good sign for recyclable material end-uses including appliances, wiring, and carpets, and for curbside collection volumes. “Permits and housing starts are leading indicators for the economy,” Biggers says. “For our industry, new houses being built means recyclable materials going into those houses. There’s a lot of potential for recycled materials in new houses. That includes copper wiring, and the aluminum, copper, and steel used in [heating, ventilation, and air conditioning] HVAC systems”

He adds that in the last decade there’s been an increase in the housing industry to reuse bricks, windows, and other parts of older buildings in new housing projects. “In custom homes there’s been reports of reusing materials from older buildings, like taking bricks or stones from an old house and putting them in your walkway,” he says. “Sometimes during a demolition, people will strip the building of recyclable materials before demolishing the rest of it. Metal from an office building may go to a recycler who chops them down to size so they can be used to manufacture new steel products.”

Photo courtesy of Saad Salim via unsplash.com.

Hannah Zuckerman

Hannah Zuckerman

Hannah is a Writer & Editor for ISRI's Scrap News. She's interested in a wide range of topics in the recycling industry and is always eager to learn more. She graduated from Bryn Mawr College, where she majored in History and a minored in Creative Writing. She lives in Arlington, Virginia with her husband.