Lumber price drop will save $40K per home, but buyers are unlikely to see it

Toll Brothers Chief Executive Doug Yearley has said the recent fall in lumber prices is helping builders realize some significant savings in terms of the cost of building new homes.

But home buyers won’t see those savings, as they’re only helping to offset the rising costs of other building materials, he said.

Yearley told CNBC’s Jim Cramer last week that lumber prices had fallen to an average of $500 per thousand board feet, down from a record high of more than $1,700 in May. That translates to around $40,000 in savings on the cost of building a single-family home, he said.

Unfortunately, costs for other key building materials continue to rise. Steel mill product prices rose 10.8% in July, coming after a 6.2% increase in June, according to the National Association of Home Builders. CNBC said tariffs on steel products are the primary reason for those increases. Also, gypsum products, which are used for drywall, saw prices increase by 2.5% in July and are up 16% compared to a year ago. Copper has also seen a jump in prices due to short supply.

“The tailwind of lumber coming down is very comforting,” Yearly said. “It’s going to help us. It’s going to drive some margin, but I think it’s going to offset some of the other costs increases we’re feeling.”

Data from the Commerce Department last week showed the median sales price of a new home has now hit $390,500, up 18.4% from one year ago.

The Toll Brothers CEO said building supply shortages mean it’s taking longer to build homes than before too. “It took about two weeks longer in our third quarter to deliver a home. We expect that to continue for a couple more quarters as we manage through it,” he added.