If you’re in the market for a new construction home, or are merely hoping to replace your deck this spring, be prepared to pay a premium for softwood lumber.
A building material shortage caused by surging demand, supply chain disruptions and COVID-19 shutdowns has increased the average price of a new home by about $24,000, says the National Association of Home Builders (NAHB).
For now, low mortgage rates are offsetting the added costs, but recent hikes to the 30-year fixed-rate average have shaken builder confidence. The latest NAHB/Wells Fargo Housing Market Index (HMI) shows a reading of 82, down two points from February and eight points from a record high of 90 last November. Any number over 50, however, is indicative of “good” market conditions.
“Supply shortages and high demand have caused lumber prices to jump about 200 percent since last April. Policymakers must address building material supply chain issues to help the economy sustain solid growth in 2021,” said NAHB Chairman Chuck Fowke.
The HMI index measuring current sales conditions slipped three points to 87 as the six-month outlook ticked up three points to 83. Builders scored prospective buyer foot traffic at 72, unchanged from February. Three-month moving averages for regional HMI scores were highest in the West (90), followed by the South (82), Northeast (80) and Midwest (80).
Other types of building materials, such as brick, granite and concrete, have gone up in price, along with finishing touches like flooring, appliances and plumbing fixtures, according to the Bureau of Labor Statistics. Americans’ increased savings and three rounds of stimulus checks have encouraged current homeowners to take on home improvement projects, while prospective homebuyers have been granted greater purchasing power.
With the spring homebuying and renovation season just around the corner, demand for building materials, hardware, paint and other products is expected to continue climbing. “Nonetheless, the lack of resale inventory means new construction is the only option for some prospective home buyers,” added Fowke.