Rapidly rising lumber prices are constricting the development of single-family homes, with builder confidence hitting a low of 83 in January.

Rising material costs (led primarily by lumber, which has continued a steady increase over the past year) together with a resurgence of COVID-19 has pushed confidence lower, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index released today. Though housing demand is high across the country and mortgage rates are near historic lows, a lack of new homes on the market is exacerbating affordability – and higher material costs, a lack of affordable lots and labor shortages compound the problem. 

The price of lumber in particular increased by 20% in December to $650 per thousand board, according to data from Random Lengths and reported by the NAHB. That followed a steady increase since the pandemic began in March; from April to August, according to the NAHB, the price of lumber increased by 110% and hit an all-time high of $950 per thousand board in September. The net result? A huge hit to developers' bottom line: the NAHB estimates that increased lumber costs increased the price of new single-family homes by $14,000 and apartment prices by $5,000.