Buyers who purchase newly constructed homes are paying more not only because of intense competition in the market but also surging lumber prices. Record-breaking growth for the cost of lumber is pressing on builders’ budgets and prompting them to pass along price increases to buyers.
Over the past year, the increase in lumber prices has added almost $36,000 to the price of an average new single-family home. At last look, lumber prices were up over 300%.
We wanted to know what was driving these extreme surges, which we have found out so far.
- Container and trucking shortages.
- Shortage of workers. At the beginning of the pandemic, manufacturing sites had to scale their workforce to accommodate the CDC guidelines. It has been hard to replace some of those workers.
- Backlog in production. Also, at the beginning of the pandemic, the lumber industry backed off on production, not ever imagining the housing market would explode as it did. Now they are playing catch up, and the pricing is a direct reflection of supply and demand.
Lumber prices are not the only construction material that has skyrocketed. Concrete is another. Tariffs coming from Japan have played a big part in the pricing increases of cement.
Consumers are paying the price, literally. New home starts see builders adding escalation clauses to protect their bottom line, not seeing relief in the near future for the costs of lumber, concrete, and other building materials.
Along with the challenges COVID-19 presented, there is also just a supply/demand in effect here. With so many people home for so long, there were lots of renovations in the construction world as well. New homes, new home offices, and just bigger spaces added.
These are indeed strange times we are living in. Will they (prices) go back to “normal,” or is this our “new normal”? Only time will tell. All of the economists that we have spoken to hold their hands up in the air and say, “I just don’t know”.
If you have some extra plywood lying around, you may want to lock it up. You may be sitting on some splintered gold!