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22 SAY YOU SAW IT IN SUBURBAN July 20, 2021 – August 23, 2021
By Jeff Ostrowski
BANKRATE.COM
Home prices are soaring,
pushed higher by a combination
of record-low mortgage
rates, strong demand
from buyers and a lingering
lack of new construction.
In 2021, a new factor put
pressure on home prices:
Month after month, lumber
prices jumped to new
highs. Lumber costs soared
more than 30 percent from
January through May.
However, lumber prices
finally are cooling a bit
as lumber mills ramp up
production to meet the
frenzied demand. In June,
futures prices for lumber
dropped below $1,000,
off 45 percent from their
springtime peak.
Even so, the National Association
of Home Builders
says steep lumber prices
still tack thousands
of dollars onto the cost of
a new home, an unwelcome
increase for buyers
already struggling to find
homes they can afford. The
trade group has lobbied
President Joe Biden and
Congress to end tariffs on
Canadian wood sent to the
United States.
The Labor Department’s
producer price index shows
lumber more than doubled
from May 2020 to May
2021. The National Association
of Home Builders
says the price tripled in
just 12 months.
Activity on the futures
markets has been even
more eye-popping. The
price of lumber for March
delivery resembles a
price chart for bitcoin or
Gamestop shares.
A series of cascading effects
Usually, homebuyers can
ignore the intricacies of
lumber futures markets
and trade policy with Canada.
But the intensity of
the price spike for wood is
affecting consumers.
The National Association
of Home Builders points to
a variety of setbacks created
by the lack of lumber.
A builder in Georgia says
he has been forced to postpone
construction starts,
delays that will limit housing
supply going into the
spring selling season.
A builder in Alabama
reports that the bill for
lumber used to frame a
typical new home jumped
from $35,000 a year ago
to $71,000 now. Mirroring
that observation, the
National Association of
Home Builders says soaring
lumber prices caused
MAINE
High lumber prices ease: Here’s what it
means for homeowners and homebuyers
the price of an average
new single-family home to
increase by $35,872 this
spring compared to spring
2020.
In another wrinkle, a
Kansas builder says appraisers
aren’t considering
lumber prices in their
analysis, and therefore are
undervaluing homes.
PulteGroup, one of the
nation’s largest builders,
says it expects to raise
prices this year as it passes
on the climbing cost of
wood. “Driven primarily
by increases in lumber and
labor, our house costs will
be higher in 2021,” Pulte-
Group Chief Financial
Officer Robert O’Shaughnessy
said in a recent
earnings call.
Homebuilders aren’t the
only buyers of lumber, of
course. Homeowners renovating
their houses also
have diverted some of the
supply by building fences,
decks and additions.
Lumber is just one factor
in home prices
Lumber prices
finally are
cooling a bit
as lumber
mills ramp up
production
to meet the
frenzied
demand.
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SERVICE
The dramatic rise in
lumber prices has grabbed
headlines in recent weeks.
But wood costs are just one
factor in the complicated
equation behind home
prices.
The biggest factor is
supply and demand. The
U.S. population, and particularly
the generational
bulge of millennials entering
their 30s and starting
households, is growing
faster than the number
of homes available. That
means that even as wood
prices come back to earth,
home prices are unlikely to
follow.
“Lumber is not the main
reason why homes are
unaffordable,” says Alex
Barron of the Housing Research
Center in El Paso,
Texas. “It is the lack of
resale supply — too many
homes are still in the
hands of landlords and
investors. We had no land
development after the
crash for over a decade.”