Outrageously high lumber prices have for months been keeping builders awake at night, and it’s going to get worse before it gets better.
Per the National Association of Home Builders, lumber prices have tripled over the past 12 months and have caused the price of an average new single-family home to increase by $35,872 — up from the NAHB’s calculated $24,000 extra HousingWire reported back in February. The hike has also added nearly $13,000 to the market value of an average new multifamily home, which translates into households paying $119 a month more to rent a new apartment, the NAHB said.
Other building material prices have been steadily rising as well, said Chuck Fowke, NAHB chairman, who added that the trade organization has been “monitoring” the situation.
“This unprecedented price surge is hurting American home buyers and home builders and impeding housing and economic growth,” Fowke said. “These lumber prices are clearly unsustainable. Policymakers need to examine the lumber supply chain, identify the causes for high prices and supply constraints and seek immediate remedies that will increase production.”
Rising prices can, of course, be traced back to the onset of the COVID-19 pandemic in the U.S. The shut down of a large swath of lumber mills in early 2020 handcuffed homebuilding crews all over the country and forced home prices upward as inventory dwindled.
Then, mortgage rates dropped below 3%, giving prospective homebuyers ammunition to continue shopping — even during the pandemic. Suddenly, any and all homes for sale were being snatched up, and builders couldn’t keep up. Prices, unfortunately, didn’t wait for them to.
As of the week ending April 23, 2021, the price of framing lumber is nearly $1,200 per thousand board feet. That’s up an almost unbelievable 250% since April 2020, when lumber prices were roughly $350 per thousand board feet.
A slew of materials were taken into account when calculating the new costs for homeowners, including beams, joists, headers, rafters and trusses, sheathing, flooring and underlayment, interior wall and ceiling finishing. The cost of cabinets, doors, windows, general roofing and siding, soffit and fascia, and exterior features such as garages, porches, decks, railing, fences and landscape walls were also taken into consideration.
The softwood products considered include lumber of various dimensions (including any that may be appearance grade or pressure treated for outdoor use), plywood, particleboard, fiberboard, shakes and shingles.
“In short, any of the products sold by U.S. sawmills and tracked on a weekly basis,” Fowke said.
In February, Fowke said the continued successful rollout of the COVID-19 vaccine should do wonders for lumber prices, as more plants will reopen in Canada and the U.S. — thus, increasing inventory and driving overall prices down. And with more homes being built, overall sentiment and builder confidence should rise, Fowke said.
Low inventory is still a thorny issue as April turns to May, but more new builds appear to be in the pipeline, according to Doug Duncan, Fannie Mae chief economist.
“The supply of existing homes for sale and an elevated level of new homes sold — but not yet constructed — should help bolster a strong construction pace of new housing starts moving into the spring buying season,” Duncan said.