Lumber Prices Continue to Soar Due to COVID-19 Building Boom
Lumber prices continue to skyrocket, holding back a resurgent housing industry.
According to new data from the National Association of Home Builders, lumber prices have risen to average more than $600 per thousand board feet. That marks a nearly 80 percent increase since April 2020.
High lumber prices negatively impact home builders and home buyers. Expensive framing lumber increases the cost of building homes, a cost that is then passed on to the buyer. The NAHB estimates that the recent hikes in lumber prices alone will add thousands of dollars to the cost of a standard new home.
“Framing lumber makes up roughly a fifth of the materials cost of building a home,” David Logan, director of tax and trade analysis at the NAHB, told MarketWatch. “When we see a price increase this large over such a short period, it’s going to have negative effects on affordability for prospective home buyers.”
The coronavirus affected lumber production in two distinct ways. First, it caused construction activity and saw mills across the U.S. to shut down, significantly reducing lumber demand. Then when construction resumed a few months later, it rebounded much more quickly than expected, creating a spike in demand that the few lumber mills in operation could not keep up with — a lumber shortage.
“There was underbuilding before the pandemic hit, and the coronavirus outbreak has exacerbated the situation by disrupting existing supply chains,” said NAHB Chairman Chuck Fowke.
Lumber prices may soon normalize as supply chains slowly readjust to new levels of demand. For now, though, they are driving up the cost of new homes and limiting the growth of the housing industry. Despite the challenges that high materials costs present, housing is still expected to remain a positive sign in an overall shrunken and sluggish economy.
“Looking forward, in this record-low interest rate environment housing should be a bright spot for the economy as rising demand continues in the suburbs, exurbs and other lower density markets,” said Rob Dietz, chief economist for the NAHB.