In recent months, lumber prices have risen across the United States. These increased prices are primarily a result of the pandemic, which has caused market turmoil.
According to new data from the National Association of Home Builders, timber costs have jumped by 130 percent since mid-April of 2020.
These rising expenses have elevated the overall price of a single-family house by more than $16,000.
Why is the price of lumber so high?
When the American government increased tariffs on Canadian lumber in April 2017, it put a lot of pressure on US lumber availability. Since then, lumber shipments have declined, and prices have risen dramatically.
In recent months, demand for lumber has soared, and vendors have failed to keep up. In addition, due to the pandemic, lumber mills were required to cease or postpone production. As a result, prices have soared.
With the coronavirus outbreak, the amount of timber needed in a building is also increasing. So, unsurprisingly, house projects are growing, with a 17 percent rise between May and July 2020.
In addition, other industries are putting pressure on the lumber business. During these difficult times, more DIYers are working on projects such as furniture and outdoor decks. Furthermore, more and more restaurants around the United States are using timber to make outside lounge and dining spaces.
Housing, constructions, maintenance, and renovation were the focus of American consumers. However, the considerable demand was difficult to explain. Mark Stinson, one lumber business owner from Missouri, told us, “It amazed not only myself but the whole business, how rapidly we came roaring back.”
Aside from the pandemic, there is the issue of escalating lumber production costs. Labor, shipping, packaging, and other costs are rising throughout the country, driving up the price of lumber too.
Will the price of lumber stay high?
Things have been getting considerably more uncertain now that the coronavirus is here to stay. As a result, our national lumber output will need to expand to compensate for the lost supply from Canada.
Shutdowns in the logging industry will also have to end. Timber manufacturers will, therefore, need to improve their production for prices to go down.
Experts have warned that lumber prices might reach a tipping point when availability becomes so constrained that demand drops drastically. Nevertheless, no one knows when this will occur or how dramatically lumber prices would collapse when it does.
How does this affect the housing industry?
“The high prices of lumber are going to force the industry to be more innovative when it comes to building materials and I truly think this is a positive change for the housing community, it will bring an industry that has become very antiquated into the modern century.” – Melissa Shea. CEO Everyday Realty Services (part of the MBH Corporation PLC)*
If you’re a developer, these soaring lumber prices are not really a bad thing. However, undeniably, the increased cost means that property prices are not the only ones rising.
In fact, mortgage payment rates are also rising. Nevertheless, buyers are eager to pay the increased price.
Mortgage interest rates are at all-time lows, which helps explain why the housing business has remained stable throughout the outbreak. For example, in July, 30-year fixed mortgage payments fell below 3% on average.
Lumber costs are skyrocketing in comparison to the previous two decades. However, because there is a significant demand for new projects, developers throughout the country should survive the unpredictable lumber industry for the coming years.
*If you are a small business owner and would like to experience all the benefits of being part of a PLC without losing control, please click here.