Everyone is used to some fluctuation within the market, but nobody could have guessed how much lumber prices would have increased this year. According to National Association of Home Builders (NAHB), lumber prices have gone up 188% in the past year, which has the average cost of building a home increase by over $24,000/home.
This increase has affected everyone in the home building business, from builders to consumers and suppliers. With the changes happening so fast, it’s been hard to keep up.
What’s caused this increase?
Last year, when COVID hit, mills had to shut down, but low interest rates caused a huge demand for construction. Plus, people were stuck at home, so home projects just continued to rise. COVID working its way through production lines didn’t help either. During the second wave of COVID, production lines were restricted during a time they’d usually be asking their employees to work overtime due to high supply demands.
How is it effecting the market?
Like previously stated, home prices have increased drastically. This increase puts homeownership farther out of reach for a lot of people even after the pandemic is over. "That means a future in which most Americans will not have the opportunity to build wealth through home equity, which will worsen inequality in our society." Daryl Fairweather, Redfin Chief Economist, stated earlier this month. Home inventory is also at an all-time low, and in two months, there may not be any homes left to buy.
Is there anything that can be done?
The housing and construction industries can do their parts by creating jobs and providing sale housing to Americans but to do that successfully, the government must step in.
The NAHB is encouraging the Biden administration to step in and act on this issue. If it continues, home builders, home buyers, remodelers and the economy will be greatly affected. Their hopes are to improve the supply chain, both for sustainability and for ease on prices.
Is there an end in sight?
Dustin Jalbert, Senior Economist at Fastmarkets RISI, told Fortune prices will eventually come back down, but he’s not sure exactly on when that will be. If the COVID vaccine rollout is successful, we may see some relief later this year. New suppliers are also joining the industry so that should ease the price rise.
These lumber prices are like nothing we’ve seen before, everyone is trying to figure out the best way to navigate this. It’s frustrating and confusing, but the best thing we can right now is to be patient.