Hanging lumber prices add $ 36,000 to the cost of a new home


Piles of materials are offered for sale at a home center on April 5, 2021 in Chicago, Illinois.

Scott Olson Getty Images

As the real estate market grows more lean, potential buyers are turning to new construction at record levels, but several factors are making these homes more expensive than ever before.

The first is a major change in market composition due to a record shortage of existing available homes. Approximately 1 in 4 homes for sale are now newly built, the largest share ever. Historically new homes make up roughly 1 in 10, but strong customer competition is behind that change. Prices for new and existing homes are at record highs.

But it is not only competition that has boosted the prices of new homes. The cost of what enters the house increases as the prices of materials and land rise.

Timber prices seem to set a new record almost daily, now they have risen 67% this year and 340% more than a year ago, according to Random Lengths, a timber industry monitoring firm. And wood doesn’t just go into framing a house. These additional costs affect cabinets, doors, windows and floors.

Timber prices are rising for a variety of reasons, not just because of the high demand from home builders and remodelers. Timber prices had already risen a year ago, but then when a pandemic hit, production shut down. Demand for the apartment was expected to dry up for a long time. But instead, after a short pause, it came back. Home builders were caught unprepared, as were wood producers.

“It is clear that increasing the cost of imports through customs does not help the situation,” said Robert Dietz, chief economist of the National House Builders Association. “We must do everything to increase the domestic supply, including the production of more domestic timber, as well as resolving the trade dispute. The issue is the availability of housing.”

The increase in timber prices over the past year has added $ 35,872 to the price of the average new single-family home and $ 12,966 to the market value of the average new multi-family home, according to the NAHB.

Workers are installing roof racks on a new house in Arvada, Colorado.

Rick Wilking Reuters

Some builders said they were slowing production at an exorbitant cost, but starting family housing rose 41% in March last year, according to the U.S. Census. Builders are obviously trying to boost production as quickly as possible to meet growing demand.

“Today, we simply have no offers for either the new home market or for resale,” Sheryl Palmer, CEO of Construction Taylor Morrisonsaid in an interview on CNBC’s “Worldwide Exchange. “

Palmer said she saw an increase in demand in all geographic regions and all market segments, especially customers who bought customers for the first time and 55+. However, the costs of the builders are out of control, she said.

“We’ve seen over the last four or five months what I’ve never seen before in my career that the tree is moving to the level it has,” Palmer said. “We are very concerned that full capacity will return to the domestic market. I think if we manage to fully supply, we can get some wood to straighten.”

But it’s not just a tree. Prices of gypsum, which is a drywall, rose by almost 7% compared to a year ago.

Steel product prices are at a record high, rising by almost 18% in March last year. Used for beams, sheet metal products and wiring.

The price of copper also set a record high price this month and stands at 27% year on year.

And there is the country. The price of an individual lot has increased this year by 11% compared to last year, because the demand is so high and the supply is small. The supply of the new plot is 20% lower than a year ago, according to Zonda, a real estate data consulting firm.

The inventory is narrowest in San Diego, Baltimore and San Francisco. Nashville is also now recording one of the biggest drops in supply. The offer of the lot in 90% of the leading markets that accompanies Zonda is considered significantly insufficiently offered.

“There’s a literal land grab as builders collect a lot to better match housing supply with demand,” said Ali Wolf, Zonda’s chief economist. “The lack of stock is real and is causing prices to rise and construction moves further into the suburbs.”

Wolf adds that the new real estate market is not meeting its full potential and will continue as long as the lack of a plot lasts. Add to that equation higher commodity prices and the new domestic market will continue to struggle at a time when it should be reaping huge rewards from hungry buyers.


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