NAHB: Skyrocketing Lumber Prices Add Nearly $36,000 to the Price of a New Home
Soaring lumber prices that have tripled over the past 12 months has caused the price of an average new single-family home to increase by $35,872, according to new analysis by the NAHB Economics team. This lumber price hike has also added nearly $13,000 to the market value of an average new multifamily home, which translates into households paying $119 a month more to rent a new apartment. Further adding to affordability woes, building material prices have by and large been steadily rising since 2020 and were up across the board in March.
The latest Random Lengths prices as of the week ending on April 23 show the price of framing lumber near $1,200 per thousand board feet — up nearly 250% since last April when the price was roughly $350 per thousand board feet.
NAHB calculated these average home price increases based on the softwood lumber that goes into the average new home, as captured in the Builder Practices Survey conducted by Home Innovation Research Labs. Included is any softwood used in structural framing (including beams, joists, headers, rafters and trusses), sheathing, flooring and underlayment, interior wall and ceiling finishing, cabinets, doors, windows, roofing, siding, soffit and fascia, and exterior features such as garages, porches, decks, railing, fences and landscape walls.
Why Lumber Prices Have Surged
These unprecedented lumber price hikes are attributable to the following factors:
– Many mills reduced production last spring due to stay-at-home orders and social distancing measures enacted by state and local governments at the onset of the coronavirus pandemic.
– When it became clear in the ensuing months that housing weathered the storm much better than predicted and demand remained strong, lumber mills did not ramp up production accordingly.
– Moreover, producers did not anticipate the massive uptick in demand from do-it-yourselfers and big box retailers during the pandemic.
– Finally, the extreme lumber price volatility has been exacerbated by tariffs on Canadian lumber imports into the U.S. market.
As lumber prices remain stubbornly high, NAHB continues to work relentlessly with the White House, Congress and lumber producers to increase production and bring prices lower. This is the top priority for the association. Since President Biden was sworn into office in January and the new 117th Congress was seated, NAHB has taken the following actions:
– NAHB Chairman Chuck Fowke and First Vice Chairman Jerry Konter held in-person and virtual meetings with congressional leaders earlier this month to urge them to address rising lumber prices and to take steps to ensure an adequate supply of lumber and other building materials to stem rising housing costs.
– In an effort led by NAHB, more than 35 organizations recently sent a joint letter to Commerce Secretary Gina Raimondo calling on her to “examine the lumber supply chain, identify the causes for high prices and supply constraints, and seek immediate remedies that will increase production.”
– NAHB has also sent letters to President Biden, Agriculture Secretary Tom Vilsack, U.S. Forest Service Chief Victoria Christiansen and U.S. Trade Representative Katherine Tai seeking prompt action to address this issue that is a growing threat to housing and the economy.
– NAHB remains in close contact with the White House and will be meeting with top administration officials later this week to discuss the lumber situation.
– At the same time, we continue to reach out to lumber producers, other policymakers and the media calling on lumber mills to increase production to meet growing housing demand.
– On the last point, NAHB has saturated the media with our message on the need to act on soaring lumber prices and how it is hurting home buyers, home builders, the housing industry and the economy. NAHB CEO Jerry Howard delivered this message in an April 22 appearance on Fox Business, Cavuto: Coast-to-Coast. The same day NAHB Chief Economist Robert Dietz discussed rising material prices on NPR Marketplace. Additionally, Fortune, Bloomberg, The Washington Post, The Wall Street Journal, Fox Business online and the Associated Press have mentioned or quoted NAHB on the impact of rising lumber prices.
– NAHB is also seeking swift action on the trade front. Tariffs on Canadian lumber shipments into the U.S. are exacerbating price volatility and increasing housing costs.
– In the near term, NAHB invites builders to take advantage of this free sample escalation clause to use in contracts which stipulates that if lumber prices increase by a certain percentage, the customer would be required to pay the extra cost.
The NAHB advocacy team – Government Affairs, Communications, Economics and Legal – continues to work doggedly on all fronts to find solutions that will ensure a lasting and stable supply of lumber for the home building industry at a competitive price.
NAHB Senior Economist Paul Emrath provides more analysis on how rising lumber prices have added nearly $36,000 to the price of a new home in this Eye on Housing blog post. Future analysis from NAHB will also examine additional factors, including other building material costs.
Learn more about what NAHB is doing to resolve the lumber crisis at nahb.org.
Source: National Association of Home Builders