America’s lumber shortage has gone from bad to worse, increasing the average price of a new single-family home by $35,872, according to the National Association of Home Builders (NAHB).
Building costs for multi-family homes have shot up accordingly, adding $13,000 to the market value of a new apartment. If passed onto renters, this would cause monthly payments to rise by $119.
Citing data from Random Lengths, a company that tracks pricing information for wood products, the report indicates that the price of framing lumber has skyrocketed nearly 250 percent annually. During the week ending April 23rd, the price surged to $1,200 per thousand board feet, up from $350 per thousand board feet one year earlier.
Even within the past three months, the added cost of constructing a single-family home has gone from $24,000 to nearly $36,000. By comparison, rising lumber prices tacked on $16,000 to material costs in August 2020.
A number of reasons have been attributed to the shortage, among them sawmill closures related to COVID-19 outbreaks, a mountain pine beetle infestation in British Columbia, surging demand from do-it-yourselfers and the ongoing homebuilding boom.
“These lumber price hikes are clearly unsustainable,” said NAHB Chairman Chuck Fowke. “Policymakers need to examine the lumber supply chain, identify the causes for high prices and supply constraints and seek immediate remedies that will increase production.”
Historically low inventory in the resale market combined with favorable mortgage rates have prompted buyers to purchase pre-construction homes at a breakneck pace. Some homebuilders are reportedly delaying construction, hoping that the price of lumber will eventually fall once production ramps up.
But this is expected to have an adverse effect on material costs, keeping them elevated for months to come as builders kick off construction on new developments. “Rising lumber costs will likely continue to be a problem for builders, which is somewhat of a concern,” said LendingTree Chief Economist Tendayi Kapfidze.
Continued demand and low mortgage rates are helping to offset soaring lumber prices for now, but the supply shortage threatens to worsen housing affordability. “This unprecedented price surge is hurting American home buyers and home builders and impeding housing and economic growth,” added Fowke.