Led by OSB, Lumber Products Now Add Nearly $30K to the Price of a New Home, $92 to Rent

Changes in prices for softwood lumber products that occurred between April 17, 2020 and July 8, 2021 have added $29,833 to the price of an average new single-family home, and $9,990 to the market value of an average new multifamily home, according to NAHB’s latest estimates. The increase in multifamily value, in turn, translates to households paying $92 a month more to rent a new apartment.

The increases are somewhat less than the April 2020-April 2021 effects NAHB reported three months ago (a $35,872 increase in house price and $119 increase in monthly rent). At first glance, the latest estimates might seem high relative to recent declines in framing lumber prices, but there are a couple of factors to keep in mind.

First, even after the recent declines, framing lumber prices are still roughly twice as high as they were in April 2020. Second, framing lumber is only one of the softwood lumber products used in the average home. NAHB’s estimates also include plywood, oriented strand board (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.

Estimates developed from the Builder Practices Survey conducted by Home Innovation Research Labs show that the average new single-family home uses more than 2,200 square feet of softwood plywood, and more than 6,800 square feet of OSB.

Moreover, unlike framing lumber, prices of these items have not declined substantially in recent weeks. In fact, since April 2020, the price of softwood plywood has increased by more than 200%, and the price of OSB has gone up by nearly 500%.

A $30K Rise in 15 Months

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

Based on Random Lengths prices reported on July 8, 2021, the costs have risen to $42,882 for the softwood lumber products in an average single-family home, and $14,631 for the products in an average multifamily home. These number represent a 153% ($25,955) and 146% ($8,691) increase in single-family and multifamily builders’ softwood lumber costs, respectively.

Prices to home buyers go up somewhat more than this, due to factors such as interest on construction loans, brokers’ fees, and margins required to attract capital and get construction loans underwritten. As explained in NAHB’s recent study on regulatory costs, for items used during the construction process, the final home price will increase by 14.94% above the builder’s cost.

The bottom line is that the OSB-led changes in softwood lumber prices that occurred between April 2020 and July 2021 have added $29,833 to the price of an average new single-family home and $9,990 to the market value of an average new multifamily home. Based on the average rent-to-value ratio in  most recent HUD/Census Rental Housing Finance Survey, the increase in builder cost and market value for a multifamily structure means tenants pay $92 more a month to rent the average new apartment due to the change in softwood lumber prices.

Moreover, even before the latest round of increases, many households at the lower end of the spectrum were being squeezed out of the market for new homes by relatively high prices.

NAHB senior economist Paul Emrath provided this analysis in a recent Eye on Housing blog post.

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  1. Larry Frazer says:

    Where are you that framing lumber prices are going down so much? July pricing was the first month that stick pricing has gone down and only about 3% June was another all time high. July sheet good pricing is at an all time high. pressure treated stick pricing was flat for July but PT sheet goods also went up for July.
    I’m not sure where you are but your not in western New York.

  2. Jessica Drzewiecki says:

    I’ve experienced and have verbalized much of what you said here. Although prices are said to be going down it is only for certain types of lumber used to build homes, not all lumber used to builder homes. And yes, even though some prices are decreasing the decreases aren’t close to the 200%+ increases we’ve seen take place in the last 12+ months. I predict just as it took a year to hit the peak it will take about that same timeframe (if not slightly longer) to come back down to pre-pandemic pricing. In the meantime, we are all paying for it. However, I didn’t realize lumber was driving apartment rent increases, I thought that was other factors, that is interesting.

  3. K. H. Knight says:

    Blame capitalism for applying the invisible hand that enforces the law of supply and demand.

    “The Invisible Hand is an economic concept that describes the unintended greater social benefits and public good brought about by individuals acting in their own self-interests. The concept was first introduced by Adam Smith in The Theory of Moral Sentiments, written in 1759.”

    Perhaps instead of trying to build affordable multifamily owner-occupied housing on infill lots in the SF Bay Area I should short lumber futures?

    BTW, thanks for the excellent data to assist decision making.

  4. I’m just waiting on appraisals to catch up. It is a broken system when it takes the market a year to reflect true market value if then.

  5. C.G. Semenza says:

    Lumber is only one piece of the price insanity. I don’t know about other areas – but here in the Northeast we are getting slammed with increases on EVERYTHING in addition to lumber on materials AND Labor starting with fuel costs for excavation and labor travel. Materials increases start with Concrete which is up 35%, Roofing up 30%, Siding Up 25-30% (If you can get it), Garage Overhead doors up 50% and 4 to 6 month wait. plumbing materials, PVC pipe, Electrical Conduit, Tubs etc. etc. all up at least by 200-300%. Good luck with Cabinets and Appliances also!And when we speak of Lumber lets not for get that includes manufactured floor systems, trusses, doors, trim, flooring and it goes on and on. So realistically, a simple 2200 s.f. ranch home that we built in the beginning of 2020 realistically all-in now cost an additional $75k more when everything is taken into account. So speaking of just lumber is only half the issue. All clients and perspective buyers hear is “lumber is coming down” – NO, NO it’s not – not right now it isn’t – especially sheet goods. Just as when fuel skyrockets overnight and takes forever to come back down to reality so will lumber and hopefully everything else will follow. Let me tell you something. When you grab a sheet of 3/4″ plywood off the rack – throw it on your cart and spend 20 minutes picking up a few more items and when you check out and the plywood went up by $7.00 in the 20 minutes you were in the supply store – that’s not a good sign!

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