How Lumber Prices Are Affecting The Housing Industry

New safety precautions are not the only items changing in the Home Building industry due to COVID-19. Lumber prices have also been on the rise due to the stay-at-home orders and social distancing precautions that have been enacted by state and local governments. These ordinances have slowed down production in mills significantly, which means lumber must be sourced and brought in from elsewhere.

With a limited production of lumber in the U.S., NAHB asks the Administration to work with Canada on a new softwood lumber agreement to end tariffs equating more than 20% on Canadian lumber shipments into the United States.

Currently, the price of lumber has increased by more than 130%, which adds an average of $16,000 to the cost of homes and $6,000 to apartments. The NAHB asks domestic mills to ramp up production to help with the shortages and increased pricing; while they work to reduce tariffs in Canada. However, mill operators are worried that there will be a drop in demand in the housing market, resulting in a decline in demand for lumber.

The drastic price increases could have negative effects on the home-building industry. The higher cost of lumber will be passed on to the buyer, which will decrease the affordability for prospective home buyers. Buyers already under contract could see issues as well. They may have to balance out the cost of lumber by giving up some of their high-end appliances or finishes in their home.

In the last decade, builders have concentrated on building homes at the top end of the market. This year that will have to change. The lower end and mid-range of the market is where most of the demand is. However, this can complicate things for builders as it means tighter margins, and the rising lumber prices threaten those margins even more. Making affordable homes less appealing.

Homebuilders are searching for other alternatives to lumber, such as steel, to help reduce the cost increase. The NAHB is working diligently to find solutions that will ensure U.S. home builders have access to a constant supply of lumber at fair prices to keep housing affordable for American families.

Regardless of a home’s cost, Centricty is here to provide our builders and their home buyers with the right solutions to help protect what matters most.

To read more about what precautions home builders are taking, and CDC guidelines, check out our blog on How Homebuilders Are Dealing With COVID-19.