California will take years to build back better after this year’s wildfires—reported to have caused $250m and $275 billion in damages — with builders’ confidence at near-time lows: “We’ve seen builder pessimism steeply outpace actual declines in construction starts, creating one of the largest disconnects since 2012,” said Jennifer Coskren, of Fastmarkets, who today wrote about the five key factors impacting housing supply.
It comes after Wood Central yesterday reported that housing supply has hit a five-year high, with developers struggling to move stock at a time when jittery homeowners are looking to downsize as the post-pandemic slowdown starts to bite: “Additionally, tariffs and their impact on the construction supply chain present a near-term risk to builders, further impacting their confidence in the market,” said Coskren and Fastmarket co-author Dustin Jalbert, who noted that the challenges faced after this year’s Californian wildfires highlight the need for more efficient and streamlined processes.
“The rebuilding process following the California wildfires is anticipated to be exceptionally slow due to labour shortages, regulatory hurdles, and insurance challenges,” Coskren and Jalbert said. “Many homeowners struggle to find skilled contractors and affordable building materials to reconstruct their homes.”
“As a result, there is a growing demand for alternative building materials such as prefabricated homes and modular construction. These methods can help streamline the rebuilding process and potentially save time and money for both homeowners and builders.”
That could include Plyhaus, a 64-part metal-clad cross-laminated timber system designed by Professor Daniel Lopez-Perez from the University of San Diego. Earlier this month, Wood Central reported that López-Pérez said that prefabrication could be a game changer for housing in fire-prone areas: “Leaving no air gaps, they don’t give the fire oxygen to grow. What is exciting about the period we live in now is that there is a collective consciousness that technology has to inform our way of building.”
Then there are mortgages, with a sharp rise in rates contributing to affordability challenges across all major markets. While rates have begun to retreat, affordability pressures remain a key barrier for existing and new homeowners. “The threshold for significant housing demand to return is likely around 5.5% to 6% mortgage rates,” Coskren said. “That’s when we’ll see homebuyers re-enter the market in earnest.”
2026 could be the year when new construction rebounds…
“New construction is projected to struggle through 2025 before a gradual improvement in 2026,” Coskren and Jalbert said. “Mortgage rates are set to continue to ease with larger declines coming in 2026….(and) additionally, by next year, the uncertainty in the market caused by tariff implementation is expected to dissipate,” they said, allowing for house starts to spike at 8% in 2026 and another 6-7% in 2027.
The report comes after Wood Central reported that Donald Trump will find it “incredibly challenging for the US federal timber harvest to offset Canadian wood products in the coming years” without significant capacity, workforce and CapEx expansion. As a result, the United States must increase federal timber harvests by 450% to meet the shortfall in Canadian plywood, OSB, and softwood lumber, used in most single and multi-family housing.
