Escalating Lumber Prices Hamper Home Owner Dreams

Filed in Advocacy, Material Costs by on September 2, 2020 15 Comments

Lumber prices have skyrocketed since mid-April, rising 130% and increasing the cost of a single-family home by more than $16,000. NAHB continues to advocate for increased production to ease the supply shortage and engaging Canada in trade discussions to remove the tariffs on Canadian lumber shipments. But solutions may not come fast enough for prospective home owners who now find themselves scrambling to find alternatives amidst these skyrocketing prices.

John and Teri Goldsmith began the process for building their retirement home in Eastern Tennessee, outside of Knoxville, in February 2020. Their plans were quickly put on hold, however, as the COVID-19 pandemic swept the country because they were afraid they would not be able to sell their current home.

As the market began to pick up, so did the Goldsmiths’ hopes of building their dream retirement home. After successfully selling their home at the end of July, the couple settled into a rental property and quickly got to work. Having secured a contractor, qualified for a construction loan and received approval from the architectural committee at their property owners’ association (POA), they were ready to break ground in early October.

On Aug. 31, however, the Goldsmiths were faced with yet another challenge. They received an unexpected call from their builder, who — while pricing another project — regretfully informed them that the price of lumber had gone up 100% since the last time he had priced it for them. Both the Goldsmiths and the builder were blindsided by the exponential cost increases, which may now make it impossible for them to complete the process.

John and Teri have begun to research alternatives, including different building methods that may use less materials. But they’re concerned the price increases in lumber have expanded to other building materials as well. With no end in sight to the price increases, waiting also becomes a challenge, as the couple is bound to the construction timeline set by the POA, which requires the Goldsmiths to break ground within 45 days of receiving approval and one year to complete the project or face penalties.

The Goldsmiths have been working hard with their contractor on a Plan B because they have already invested $15,000 in permit fees and $10,000 in contractor deposits. This “discovery phase,” as John called it, has made planning difficult, as there are still many unknowns out there. But they’re hoping there is light at the end of the tunnel.

Share Your Lumber Story

NAHB would like to hear how rising lumber prices, and the limited availability of lumber, are affecting your business and the impact on housing affordability. For example, missed closing opportunities, increased costs, buyers being priced out of the market, etc. This will help us further illustrate to the Administration and Congress why a plan to address the lumber crisis is urgently needed. Share your story here.

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Comments (15)

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  1. Northeast Florida Builders Assiciation PWB Council is hosting a supply shortage panel with different building supply vendors tomorrow at 10 am EST. We’d love you to attend! Message me for info!

  2. Paul says:

    From May, 2018 to December 2018, Random Lengths lumber futures on the CME went from $624/MBF to $327/MBF. A 48% drop in 7 months. As a result of this crash, hundreds of hardwood and softwood mills closed their doors and mill owners and employees were without jobs.

    During that time, and until this latest up-swing, builders and homeowners enjoyed lumber prices not seen in several years. Lumber is a commodity, no different than oil, natural gas or corn, and the price of commodity goods are always moving. When mills are driven out of business because of over supply or under demand, the correction isn’t felt by consumers until other influences on the construction industry (low interest rates, booming economy, surge in housing starts) drive greater demand than the remaining mills can supply.

    These low interest rates and a booming economy created this perfectly predictable climate. We are frequently faced with consumers who don’t want to believe what the supply side of the industry faces every day; the ebb and flow of supply and demand. The 16 year look back average or RL lumber is $338/MBF, which includes the most recent peak we are currently in.

    When lumber prices rise more rapidly than buyers predict, it is not gouging, it is capitalism. The product is worth what customers are willing to pay and those who “want”product more than others, will pay what others wont. That dynamic alone moves the needle. References to pricing for this reply are available online at numerous websites by searching for historical lumber futures pricing.

    • NAHB Now says:

      NAHB monitors a number of factors in its analysis of market conditions, including employment and long-term price trends. In addition to the information shared above, it is worth noting that from the middle of 2018 until the end of 2019, sawmill employment in the US increased from 92,600 to 93,500. In fact, from 2016 until the end of 2019, sawmill employment has been relatively stable, ranging from 90,700 to 93,500.

      Additionally, the 2018 price drop referenced occurred immediately after a 33% increase over the first five months of the year. By the time prices began their decline in 2018, the average price of lumber had increased 64% since the market began pricing in Canadian lumber tariffs in January 2017. In fact, the average prices in 2017, 2018, and 2020 are three of the four highest annual averages since 1995.

      • Scott says:

        Thank you for the proper factual context and clarifying economic statistics. That being said, employment numbers may only tell a part of the story if consolidation occurred. Employment could be stable but if smaller lumber producers closed or merged then the larger companies controlled more of the market.

        Certainly lumber producer’s decision to limit supply/production in recent months has increased their prices and profit as they benefit from their created shortages.

  3. Is it impossible for them to complete the process b/c the lumber cost increase means the construction loan is not for enough money to pay for the build?

  4. Johnny W says:

    My wife and I are in the category of buyers priced out. Like everyone, we have a budget to adhere. I cannot get over spending the extra $30,000 for the same house from a year ago. Unfortunately we will not get our dream home as we planned. Our two boys, 6 and 8, will have to wait to get into that development with their friends. It is not easy to answer when my oldest says, “Dad you can get rid of the playroom so the house doesn’t cost so much.”

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