In February, lumber prices topped $1,000 per thousand board feet for the first time, according to the March lumber futures market. Simultaneously, single-family housing starts dropped by 12% compared to December 2020, according to the U.S. Census. That price had doubled from just three months earlier, CNBC reports.
While homebuyers are seeking more affordable homes, builders are finding it increasingly more difficult to deliver newly built, affordable homes due to the spike in lumber costs. The price increase in lumber has corresponded with a drop in housing starts in January 2021.
“Builders report concerns over increasing lumber and other construction costs, and delays in obtaining building materials,” said Robert Dietz, chief economist at the National Association of Home Builders (NAHB). “Rising interest rates will also erode housing affordability in 2021, as inventories of existing homes remain low.”
The number of single-family homes that have received building permits but have not yet started building has jumped 28% higher than a year earlier, as building material costs increase and delays slow some home building, says Dietz.
In March, NAHB Chairman Chuck Fowke said, “High lumber prices remain the No. 1 issue facing and threatening home builders.” Strong housing demand, low-interest rates and a boom in home remodeling continue to push prices higher. Fowke warns that, “The long-term effect of these sustained high prices could be devastating for home builders and homeowners. This is about the attainability of the American dream of homeownership for an entire generation.” At some point, however, the basic reality of affordability could potentially slow some of the growth in home prices.
What exactly is going on?
When states issued lockdowns in spring 2020, U.S. sawmills across the nation closed, reports Fortune.com, resulting in a falling lumber supply. Simultaneously, those quarantining at home realized it was a perfect time to tackle home renovations or DIY projects, resulting in a rising demand for timber.
“Prices started to drop in the fall of 2020, hitting $550 per thousand board feet in early November,” Fortune.com reports. “It looked like the correction was starting. However, the U.S. explosion in COVID-19 cases in the final weeks of 2020 saw sawmill production slow down, particularly in areas cutting California redwood. That helped push prices sky-high again.”
Source: Fortune.com
Photo: iStock.com/gwycech
