Soaring Lumber Prices

At a time when home prices are already at an all-time high, these increases are threatening housing affordability as a result of timber shortages. Out-of-control timber pricing can add millions to development costs, and developers must contribute to the cost of projects or raise prices for the next group of customers. The most likely affected customers are going to be the front-line and essential workers-who have been burdened with the cost of the pandemic.

While future timber prices are hard to predict, experts say some measures may be able to reduce the cost of timber in the US. Combined with seasonality, it is possible that the price of wood will continue to fall below its historic highs, giving builders and buyers some breathing space. Fowke said that if the COVID-19 vaccine continues to be introduced, allowing for the safe reopening of more timber factories, timber prices could fall. The bottom line is that any increase in timber prices would be temporary – after all, timber grows on trees – and that US home prices would continue to rise

Softwood lumber prices continue to rise, with records breaking in July, according to a new report from the U.S. Department of Housing and Urban Development (HUD). The price of wood, a key component of the timber supply chain, has soared in recent years due to rising land prices.  Since November 2020, the price of wood has almost tripled in boards per thousand feet.  Meanwhile, the National Association of Housing Builders (NAHB) expects timber prices to increase the cost of a typical home by $24,000, and the cost of single-family homes will increase by more than $12,500 for each new developer planning a new project. The rise in house prices comes as house prices are set to rise by 2020 after annualized house prices fell to 934,000 in April, the lowest level since 2009, at the start of the week of the Coronavirus pandemic.

The good news is that while timber prices need to be adjusted slightly, interest rates are at an all-time low and prices have been adjusted to keep the soaring price of timber low, mainly due to the low interest rate environment. The mortgage industry has been fortunate to offering home buyers rock bottom interest rates for either refinancing or purchasing.  The incentive programs have been very ideal for first time buyers where a down payment, up to $25k, for many first-time buyers keep many in the market.  These programs incentivize many renters to get into the market for purchasing a home.  Conversely, these programs are competing against a housing shortage and the restrictions of the pandemic.  It is like giving many of those hope without the means of following through the promise.    

Steve Unruh


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