Lumber prices have skyrocketed since mid-April, rising 130% and increasing the cost of a single-family home by more than $16,000, according to the National Association of Home Builders (NAHB).
In August alone, lumber prices increased 14.9%, marking the largest four-month gain since such data was first recorded in 1949 and the second-largest gain since seasonally adjusted data became available in 1975, according to according to the latest Producer Price Index (PPI) report released by the Bureau of Labor Statistics.
The sharp increase has put pressure on homebuilders and homeowners alike to figure out how to close the gap. Consider former NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. He received a lumber quote earlier this month for more than $28,000—twice what he had paid for the same lumber on a comparable project in February 2019. Oriented strand board, which Noel’s company uses frequently in its projects, had increased from $7.50 per sheet to $26 per sheet.
Because the homes have already been sold, Noel is looking toward alternative building materials, such as steel, to help minimize the cost increases. Not all builders will be able to close the gap, though.
“I know builders who have had to call customers and give them their deposit back and say, ‘I can’t build your house because of the price of lumber,'” Noel said. “People already have their loan secured and can’t increase the price.”
Appraisals will likely compound the problem for homebuyers, Noel added, since comparable sales of existing homes aren’t increasing sharply enough to factor into appraisers’ equations.
Noel said the best immediate-term solution is to remove tariffs on Canadian lumber. “If lumber mills are struggling to keep up, [U.S. Commerce] Sec. Ross can remove tariffs temporarily to keep lumber prices from skyrocketing,” he noted.
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