High Demand For New Homes Fuels Surge in Lumber Prices
The price of lumber has shot up 110% since mid-April, according to a report from the National Association of Home Builders.
The construction of residential housing remains a strong point for the economy during the COVID-19 pandemic, but there’s a catch.
Rising demand has pushed up the cost of the lumber needed to build new homes, and framing lumber prices have increased more than 110% since mid-April, according to a new report from the National Association of Home Builders. Lumber prices dipped in the earliest days of the pandemic, but quickly recovered and then some.
“[The association] estimates that these recent gains have boosted typical new single-family home prices and apartment prices by approximately $14,000 and $5,000, respectively,” according to the report. “Without increased domestic production and reductions in Canadian tariffs on softwood lumber, these higher input prices will slow the market.”
Early concerns that the health of the overall labor market would constrict new home construction have thus far proven unfounded. The number of people employed in home construction increased by 24,000 in July, according to data from the Bureau of Labor Statistics. However, employment in non-residential construction declined by 4,000.
Demand for housing is being fueled by numerous factors, according to the report. Low interest rates and an higher demand for lower-density areas such as suburbs and exurbs are contributing to the hot housing market. The NAHB/Wells Fargo Housing Index—which measures home builder confidence—hit an all-time high of 78 in August. That confidence is bolstered by the fact that the supply of new homes is tight at the moment.
And builders are rushing to meet that demand. The number of new single-family homes that began construction increased 8% in July, the report says. Home building permits were up nearly 6% in July, indicating a construction increase in coming months.
Improved employment rates are a good sign for housing demand, the report notes, but additional COVID-19 lockdowns and a subsequent rise in unemployment could derail the housing market’s recent gains.