Average New Home Price Now $16,000 Higher Due to Lumber

Filed in Advocacy, Economics, Housing Affordability, Trade by on August 21, 2020 15 Comments

up arrow(Updated on Saturday, Aug. 22)

The recent spike in softwood lumber prices has caused the price of an average new single-family home to increase by $16,148 since April 17, according to NAHB standard estimates of lumber used to build the average home. Similarly, the market value of the average new multifamily home has increased by $6,107 over the same period due to the surge in lumber prices.

According to Random Lengths, as of Aug. 21 the price of framing lumber topped $800 per thousand board feet — a 130% increase since mid-April.

NAHB calculated these average home price increases based on the softwood lumber that goes into the average new home, as captured in the Builder Practices Survey conducted by Home Innovation Research Labs. Included is any softwood used in structural framing (including beams, joists, headers, rafters and trusses), sheathing, flooring and underlayment, interior wall and ceiling finishing, cabinets, doors, windows, roofing, siding, soffit and fascia, and exterior features such as garages, porches, decks, railing, fences and landscape walls.

The softwood products considered include lumber of various dimensions (including any that may be appearance grade or pressure treated for outdoor use), plywood, OSB, particleboard, fiberboard, shakes and shingles — in short, any of the products sold by U.S. sawmills and tracked on a weekly basis by Random Lengths.

At the prices reported by Random Lengths on April 17, 2020, the total cost to a builder for all the lumber and lumber-related products described above was $16,927 for the products in an average single-family home, and $5,940 for the products in an average multifamily home.

But by the time Random Lengths reported prices on Aug. 21, the cost to builders had risen to $30,470 for the softwood lumber products in an average single-family home, and $11,061 for the products in an average multifamily home. This is a $13,543 (80%) and $5,122 (86%) increase respectively, in only four months.

The price of the home to the ultimate buyer has gone up by even somewhat more than this, due to factors such as interest on construction loans, brokers’ fees, and margins required to attract capital to residential construction and get construction loans underwritten. For items such as lumber that are purchased and used throughout the construction process, NAHB has estimated that the buyer’s price will increase by an additional 19.2% (see the appendix to Government Regulation in the Price of a New Home for details).

The bottom line is that the spike in lumber prices that occurred between April 17 and Aug. 21 caused the price of an average new single-family home to increase by $16,148, and the market value of an average new multifamily home to increase by $6,107.

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Comments (15)

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  1. Frank Morse says:

    Since we are using the term “average” what square footage of total area was used to determine the 16k jump in prices. For builders in the high end custom market, that factor could make a significant increase over that figure.

    • NAHB Now says:

      Thank you for your comment and question. The “average” refers to the average amount of lumber in a home as reported in the Builder Practices Survey (BPS) conducted by Home Innovation Research Labs. The BPS collects information from thousands of builders on all types of single-family detached homes they build (including starter, move-up and luxury). However, the survey does not define these categories by size. Results are then weighted and the averages are determined based on the resulting estimated builder practices for all single-family detached homes built in the U.S. in a given year.

  2. Tony Crasi says:

    Thank you for the article. Having this to show my current custom home customers will help them understand it’s not just me raising their prices.

    However, this increase in price has potentially put a halt to an market rate infill project we were planning to start this fall in a economically challenged area of Akron Ohio.

    Our low to moderate income families were able to qualify for these homes because of a 15 year real estate tax abatement that Akron offered. This project was meant to jump start the rebuilding of the entire neighborhood.

    This increase in lumber pricing has completely eliminated the advantage of the tax abatement thus putting an end to the project. So anything NAHB can do to get to the bottom of the increased pricing would mean a lot to many people.

    Thank You,
    Tony Crasi
    Past Ohio Home Builders State President

    • Robbie Watkins says:

      The price increase has come mainly from the government funding the greatest family income increase in history. The government then told people they must stay at home and while they stay at home, they can spend that new found money at Lowes, Home Depot and other building supply stores that were deemed essential. In essence, the government created an environment of too much money chasing too few goods!

  3. I can see how some contractors oversee situations like these on their construction contracts and as a result have financial disagreements with their existing clients. I personally know an acquaintance that breached their new home building contract with their builder because he started tacking onto their contract expense.

    • Cheri robson says:

      Morning
      I am in the Nashville TN area and am seeing the same increase in costs. Does anyone have an opinion on if we are topped out or if we can expect to see prices continue to rise or will they drop back down. Just looking for opinions.

  4. Kevin Crawford says:

    I’m lucky that I don’t need to build anymore to live. I build because I love it. Just started my 8th personal home, foundation is in… We will cap it and stop. I’ll wait till after Nov 6 and longer if needed. If we all stop prices will suddenly fall. I’m not believing all of these price increase is related to covid.. Sorry not buying it.

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