Lumber prices hit another record high last week, with the price having risen now by more than 170% in the last 10 months, according to a report by the National Association of Home Builders.
That’s bad news for buyers, as home builders have responded by increasing the prices of new homes. The soaring cost of lumber has added “thousands of dollars” to the price of building a new home, and that extra cost is being passed on to the consumer.
Builders say the main reason for the rising cost of lumber is tariffs on Canadian lumber shipments, which have exacerbated what they call “unprecedented price volatility” in the market. The U.S. relies on Canadian imports for a substantial chunk of the lumber used in the home building industry.
The NAHB said the lumber price spike has not only sidelined many would-be home buyers, but also caused many sales to fall through as builders suddenly put construction projects on hold. The problem is made worse by the fact that new home inventories are already at all-time lows in many U.S. markets, the association added.
The report said that several home builders have had to delay construction starts due to the high lumber costs. Those delays are happening at a time when demand for new homes is rising fast.
“This increase has definitely hurt my business,” said Alicia Huey, a high-end custom builder from Birmingham, Alabama. She explained that the cost of the traditional lumber framing package on identically-sized homes has risen from $35,000 to $71,000 in the last year, more than double the cost.
“I’ve had to absorb much of this added cost and even put some construction on hold because I would be losing money by moving forward,” Huey said.
The NAHB said at the end of last year that rising lumber costs had added an average of $16,000 onto the cost of a newly built home. But lumber prices are now even higher, and so the added cost is also likely even more than that. And there’s another problem too, as appraisers are reportedly not factoring in the extra costs of lumber into their calculations, which means many new homes are being undervalued. That is “disrupting home sales and preventing closings,” said NAHB third-vice chairman Carl Harris.
Chuck Fowke, chairman of the NAHB, said the rise in lumber costs is clearly unsustainable and is having a negative impact on housing affordability.
“Given the ongoing period of high demand, the Commerce Department should be investigating why output from lumber producers and lumber mills is at such low levels,” Fowke said.