Record-High Lumber Prices are Hammering Housing Affordability

Filed in Advocacy, Housing Affordability, Material Costs by on February 12, 2021 35 Comments

Soaring lumber prices are adding thousands of dollars to the cost of a new home, pricing out millions of potential home buyers and impeding the residential construction sector from moving the economy forward, according to NAHB.

“According to Random Lengths, the price of lumber hit a record high this week and is up more than 170% over the past 10 months,” said NAHB Chairman Chuck Fowke, a custom home builder from Tampa, Fla. “NAHB is urging President Biden and Congress to help mitigate this growing threat to housing and the economy by urging domestic lumber producers to ramp up production to ease growing shortages and to make it a priority to end tariffs on Canadian lumber shipments into the U.S. that are exacerbating unprecedented price volatility in the lumber market.”

Lumber price spikes are not only sidelining buyers during a period of high demand, they are causing many sales to fall through and forcing builders to put projects on hold at a time when home inventories are already at a record low.

Impact in Local Markets

“The increase in lumber prices is forcing our company to delay construction starts, which will only exacerbate the lack of supply in our market,” said NAHB First Vice Chairman Jerry Konter, a home builder and developer from Savannah, Ga.

Alicia Huey, a high-end custom home builder from Birmingham, Ala., and second vice chairman of NAHB, said that the price of her lumber framing package on an identically-sized home has more than doubled over the past year from $35,000 to $71,000. “This increase has definitely hurt my business,” she said. “I’ve had to absorb much of this added cost and even put some construction on hold because I would be losing money by moving forward.”

“Appraisers are not taking rising lumber costs into account, which is disrupting home sales and preventing closings,” added NAHB Third Vice Chairman Carl Harris, a custom builder from Wichita, Kan.

Access to Building Materials Top Concern

Housing has been an economic bright spot amid the COVID-19 pandemic, but the industry’s potential to lead the economy forward is limited as long as lumber remains expensive and scarce. A recent survey of NAHB members reveals that 96 percent said that inconsistent access to building materials are their most urgent concern. In turn, supply shortages are leading to soaring prices. And it’s not just skyrocketing lumber prices that builders are dealing with. The price of oriented strand board has more than tripled since last April.

“Clearly these price increases are unsustainable, particularly in light of a continued housing affordability crisis,” said Fowke. “Given this ongoing period of high demand, the Commerce Department should be investigating why output from lumber producers and lumber mills are at such low levels.”

For more information on how NAHB is addressing the lumber crisis, visit nahb.org.

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Comments (35)

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  1. Adrian says:

    Any reductions in output can likely be linked to COVID challenges and disruptions. Demand is greater than ever. Any mill that is holding back production would be completely ridiculous because of the record prices. Tariff reductions will help, but the winter weather will pose challenges for Canadian produces. As much as everyone would like to build a home, supply and demand principles remain the same. Either build more mills or raise prices until demand is met.

    • Bill Crawford says:

      Adrian is 110% correct on all counts. The fact that the NAHB thinks the Biden administration is going to solve a global supply demand problem when they are only going to make the situation worse by suggesting a first time home buyer credit is laughable.

      I’m not sitting on lots and will just pass along the price increase to the customer which I have already done.

      I would rather have a situation of supply constraints and increases in costs with a line out the door of buyers at any price with 3% mortgage rates vs. the housing recession when you couldn’t give away a house

  2. Mike White says:

    Lumber cost are killing us small guys. We build fences and decks and customers are shocked when they see estimates we give them. Most say they cannot afford or say they will wait. If supply and demand are the issue and mills are not running at full speed but making record breaking profits why would the mills want to change anything. Greed, greed, greed. When housing hits the slowdown it will be amazing how fast the prices come down! It’s just not right.

  3. Kevin Compton says:

    Can u let me know the national average for drywall,2019 was 4.5% 2020 was 3.5%,suppliers went up on board again,is wage theft the contribution to this?.HBA in Ohio decided to pay 1/3 of the national average and wont budge from it,there hasn’t been a family man in residential trades for many years in northeast Ohio.

  4. Jim says:

    I don’t ever think the addition of a couple of thousand dollars to the cost of a home will ever effect it’s affordability. The thought is asinine. There are so many factors right now causing the rise of houses not reilient on lumber. Nice fail.

    • David Markell says:

      It is not a couple thousand. My framing lumber and OSB pricing increase from same house a year ago is $50,000. If you think that is a couple thousand I will trade you $2,000 for $50,000 so I can afford to build my home.

  5. Mark Browne Owner Builder says:

    My owner builder project has been shuttered since October where my lumber package had already doubled and now it is beyond 100% increase as of a week ago. I have a considerable investment in my lot and a covered slab with plumbing and electrical waiting for affordable framing lumber.

    • Clark fay says:

      Metal studs, look into it.. full tress system out of metal also

      • Tom Broz says:

        Metal studs 50% with more increases on the horizon. Interest rates are already very low and we could see a recession in the third quarter. And if anyone thinks this current president has any answers, I sure would like to hear them.

      • D Ready says:

        Steel prices have been going up since Aug 2020 and are at record highs also. Also steel mills continue to limit production and utilization is down 8 to 10% from a year ago.

  6. Noah Beach says:

    The government on multiple fronts are the reason for the increase. Tarriffs are 1 reason but not the main reason. Incredibly low interest rates set by the Fed and mandatory quarantining has caused the change in prices. Without the demand the prices would be low. Cheap money for mortgages have spawned on all kinds of construction. For instance 2 of my neighbors are doing major add-ons. So saying lumber mills are greedy is ignorant. All contractors set prices on supply and demand. If you have a long list of people waiting on your services most people increase their fees. All commodities work this way.

  7. Timothy M Logan says:

    The government could come up.with a program to lock into a rate and build later. This could help disburse demand, this lowering demand.

  8. Jonathan S Elliot says:

    These lumber mills are soaking up the profits. Problem to me is that as a trucker the hauls it. They aren’t sharing any of it with us. We’re still hauling it for the same cheap rate. Pure greed.

  9. Randy says:

    Composite material needs to have a better looking into.

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  11. Joe schulist says:

    Many justifiable reasons lumber costs have skyrocketed. Problem is ,Once these mills, private businesses, see how much customers will willingly or need to pay to sustain their businesses, why sell for less. Look at the 2 largest producers of OSB panels made basically from wood scraps run their prices up to $30 a sheet. Something really stinks there and in my opinion should open up an investigation into price fixing. We will see how fast OSB t prices drop when that news breaks.

  12. Francis says:

    Of all the “knowledge” I received in college, the most significant insight that has stuck with me over 30 years ago was a simple comment made by a professor. That is, since the beginning of time, humans have always been greedy, period. This will never change.

    Hoping for a better 2021 for all.

  13. Linda Reed says:

    Supply and demand, free market pricing – that’s the US economy. The government has never been the answer, especially in the lumber market. Remember the price controls in the 1970s? It’s a long game for a lumber producer. They have years in the cycle where they don’t turn a profit. It’s easy to call the price increase “greedy.” Private timber owners and sawmill owners have a lifetime of investing, farming their crop, and investing in innovating manufacturing, all while trying to keep skilled workers on the job. I am a realtor, but spent 30 years in the lumber industry as a wholesale lumber broker and also a sawmill sales manager.

    • Connie Ray says:

      That is absolutely correct. Supply and Demand always drives prices. The government has created this mess. People need to go to work not sit at home and wait for a check from the government. It maybe a difficult pill to swallow but work equals productivity. Free Market! FREE WORLD!

  14. Thom W Wright says:

    Quite simply, price balances supply and demand. Currently the two are in balance only because of historically high prices. Reduce the price of lumber without other reductions would merely lead to shortages in the supply of lumber, arguable an even larger problem.

    High prices, over time lead to their own solution. In this case, more mills. Of course this is not a normal case. Government manipulated the market by mandating closing many mills for Covid while at the same time handing out cash like candy AND pushing mortgage interest rates to historically low levels.

    Government is not the solution here, it is the problem.

  15. Bob Stumpf says:

    Just as high oil prices have spawned Electric Vehicles, so to shall high lumber prices spawn alternative materials like steel studs and 3D printed homes with concrete walls. The oil suppliers are scrambling to reinvent themselves and so too will the lumber companies. Usually, “supply and demand” evolves into sheer greed and sheer greed evolves into “alternative materials/ ideas. It’s only a matter of time…

  16. C. Calkins says:

    I appreciate the insight of what appears to be quite a few people who really understand the situation.

    This article comes on the heels of my wife and I cancelling the purchase of a $50,000 lot (literally yesterday) and telling our potential builder that we will not be building the $447,000 home we were about to sign for. Last summer was spent chasing materials for weeks to build an 8×12 deck I replaced at my rental property. The cost of improvements vs rent for that property is not sustainable either, so we will be selling it and taking the significant profits off of the table and out of the economy, too.

    In the end, we’ll wait until either a crash or a slow return to sane prices, and then we’ll simply add a first floor master to our 4 bedroom home that we bought $186k in 2017. I can do some of that work myself, at the pace a disabled retired vet like me can enjoy. Although my main employment was as a teacher, I’ve been licensed since 1996, so I’ll act as the GC for the rest of it. A 5 bedroom home with 2 owner’s suites and 4 bathrooms is ridiculous for 2 people, but it’s energy efficient, we like the neighbors, and the price is right.

    The point is, I see at least 5 different negative economic effects of our decisions, and I’m guessing we’re not the only ones in this position. The crazy cost of lumber and rising cost of new home construction in general is the tipping point that led to this cascade of events that will impact the employment of quite a few people. It’s why I’m very concerned about an impending crash due to this nationwide issue.

  17. Diane says:

    My son and his family planned to build a house spring 2020. In the 8 weeks it took to process the loan the price of lumber in Feb was approximately 250 per 1000 board feet by the end of April it was 900 per board feet!! Due to his wife’s student loans they were limited on the amount of money they were allowed to build their home. When they went back to the company for an updated material cost list there was no way they could stay in budget and build their modest 1680 square foot home. It is so unfair. They have worked hard to have a home for themselves and their 2 small children but at these prices it will never happen.

    • Tom Broz says:

      These are unprecedented times. It appears that every manufacturer in the construction industry is capitalizing on the covid crisis by raising prices. The more people who “pull their horns in” as your son and his family did, the sooner prices will come down. Couple that with the tax increases coming, and I would expect a pretty good slow down in the economy. The day will come where building a home is affordable. We just need to wait out the inflation that is consuming the nation right now.

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