If you’ve been thinking about buying a brand-new home, building a home, or even making some renovations to your current home, you might want to make a move sooner rather than later. The COVID-19 pandemic has driven up the price of lumber—and in turn the price of homes and materials. There’s still time to stock up, but prices are definitely on the rise!
As the Lumber Industry Struggles, Prices Climb
When the COVID-19 pandemic shuttered businesses across the nation, the lumber industry was faced with a significant slump in demand—and prices. A lot of production mills closed down or were forced to lay off workers. The construction industry slowed, and with it, the lumber industry. But in recent months, the housing market has picked back up with a vengeance—leaving lumber mills struggling to find the inventory needed to supply all the sudden demand.
So, what exactly does that mean for you?
The price of new homes could rise
Did you know that framing lumber makes up about a fifth of the material cost of building a home? Factor in a rise of about 110% in lumber prices since mid-April, and we could be seeing a sizable increase in the price of new construction homes in the coming months. In fact, the National Association of Home Builders estimates these increases have already driven up the price of a new single-family home about $14,000.
If you’re thinking about purchasing or building a new construction home you might be looking at paying a premium for the increase in the cost of building materials.
We could see a drop in square footage of new homes
As builders struggle to negotiate with buyers unable to pay higher prices for new homes, the result could be a compromise in overall square footage of new homes. In 2018, we saw a similar rise in lumber prices, and consequently, the square footage of new homes decreased to compensate for the lower price tag. Today’s price hikes and low inventory could result in a similar trend.
Building a new home in the coming months might mean paying more for the home you want or omitting some square footage—or a combination of the two.
The price of home improvements could rise, too
Whether you’re planning a DIY project or hiring some outside help for a larger improvement, you could be looking at a steep climb in the price of your project, depending on how much lumber is required. Pre-pandemic lumber prices sat around $425 per thousand board feet and dropped down to $320 when the market slumped. Now, those prices have climbed to over $900 after a sharp incline starting in July.
To put that into a DIY-er perspective, a sheet of plywood that cost $8 in February might cost more like $20 today. That adds up pretty quickly on a home renovation, and even more quickly on a brand-new home.
The demand for new construction could slow
The residential construction industry has played a big part in post-pandemic economic recovery. In fact, home construction saw an increase of 24,000 employees in July, according to the Bureau of Labor Statistics. The number of single-family home builds increased by 8% in July, while home building permits increased by 6%. But increases in lumber prices—and therefore home prices—could slow the exponential demand the market has seen in recent months.
Will buyer demand—largely fueled by record-low mortgage interest rates and a shift towards the suburbs—decrease as prices rise? Will demand shift to resale homes, which are already in short supply and high demand? And if so, what will that do for the construction market, the real estate market, and the overall economy?
We can’t answer that, but we can tell you that lumber shortages, and climbing prices, likely aren’t going to go away this year. If you’re thinking about making a move or planning a home improvement, the time to get started is now—before prices increase more.
Planning a Home Improvement?
Are you thinking about making some updates to your home? Whether you’re looking for some DIY tips or searching for a contractor, we’d love to talk about your goals! Contact Raleigh Woodworks today and let’s chat.