Rising Lumber Prices and Lack of Supply Threaten Consumers’ Housing Options

Filed in Advocacy, Housing Affordability, Material Costs by on February 16, 2021 11 Comments

lumber prices affect new homes under constructionHousing affordability has been a critical issue across the country for years, as factors such as a shortage of lots and labor have led to a limited supply. As lumber prices once again approach all-time highs amid a supply shortage, this crisis only gets worse, as housing prices continue to soar and builders face challenges to meet ongoing housing demands.

“The continuing rise in building cost — including rising lumber prices, availability of material, etc. — is causing a sudden downturn in new home starts,” said Cory Lord, a builder based in Georgia. “We are finding it hard to complete current contracts on time, and home owners are not able to afford to sign new contracts with the escalated cost.”

The rising supply costs are exacerbated by the uncertainty of when supplies will be available to complete the home in a timely manner and whether or not the homes will appraise at the correct price to reflect these rising costs.

“We had one home owner walk away from a contract at signing because we could not promise her a completion on her home within a five-month time frame, even though we explained to her that the current limited availability on some products was causing delays that were beyond our control,” stated Lord.

Other builders have noted that market uncertainty extends to prospective home owners’ financial positions as well, such as the risk of unemployment or retirement with a fixed income, which often makes them more apprehensive or less flexible to move forward with higher costs.

“In such a fragile marketplace, consumers cannot afford to add another $10,000 to $30,000 for the frame package,” observed Tabitha Casamento, a builder in Upstate New York. “I have repeatedly asked when this will normalize from a national supplier, but there’s no end in sight.”

Builders are doing everything possible to avoid pricing consumers out of homes while still maintaining competitive prices necessary to operate their businesses — especially given the potential long-term impacts on consumers, as the purchase of a home is often a key factor in building wealth.

“We’ve had to raise sales prices by more than $50,000 since August because of rising lumber prices,” shared Michael Betcher, an affordable first-time buyer production home builder in Arizona. “This prices most buyers out from being able to qualify for a new home, and perpetuates the cycle of renting and not building equity.”

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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  1. Jen says:

    There is no solution to increase mill production?

    • NAHB Now says:

      Jen: The market for single-family home building is stronger right now than at any point since the mid-2000s. We will continue to make the business case to lumber companies that an increase in production at the mills will pay off for at least the next two years and that buyer demand for new homes – and home owner demand for remodeling – supports maximum lumber production.

  2. Neil Pinkney says:

    Yes, lumber price costs are a problem. We look at this differently. Our non combustible structural insulated sheathing panel reduces a portion of lumber needed. This is a excellent panel that installs the same as plywood, exterior drywall etc.
    Has a high r rating, 2 hour burn test, Mold mildew and moisture resistant. Green sustainable product

  3. wayne dunn says:

    Appraisal, both on the construction lending and buyer side are now the new problem. As we Builders all know, we live and die by appraisers. Buyers are willing to still purchase new homes in my market even with a $30k-$50k price increase, but they simply will not appraise. I have little confidence that the new political environment will move to address this problem.

  4. Rick Zaslove says:

    I work for a major lumber distributor on the west coast. Prices and availability have been challenging only for the last 10 months. All time low Interest rates and COVID are the driving factors in this price explosion! The lumber industry has constrained its supply over the past few years because housing was so poor… Now in the last year, moving out of high density locations with higher home values and buying in Suburban communities seem to be the norm during this pandemic. Builders continue build at a feverish pace and some products are getting expensive and scarce. We have been able to keep up with our customer needs! There is no way the supply chain could have filled this unexpected hole. This is text book true economics. Over the next 6-9 months supply will increase in the US and imports of building products will increase as well… The increased price of lumber per house is being passed on to the consumer with low interest rates making that possible. In the west over this past year, lumber for a single family residential track home increased on average $20-25,000.
    That’s about double the price it was in 2019, pre pandemic. As interest rates climb and production picks up at the mill level, prices will flatten and fall.
    Inflation will be tamed in time and we will all look back at this crazy year hoping it was a once in a lifetime event.

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