Rising lumber price adds $19,000 to the cost of a new home

Since the beginning of the pandemic, the price of lumber has been on a roller coaster, and it is now mounting a steep incline once more.

Lumber prices began rising again in December after falling dramatically from a record high in May of last year. According to Random Lengths, they are now around 22% lower than their high, but still roughly three times their typical pre-pandemic price.

This raises the expense of both constructing a new home and modifying an existing one. According to the National Association of Home Builders, the recent price jump increased the cost of a newly constructed home by more than $18,600. It also increased the cost of the average new multi-family property by approximately $7,300, resulting in households spending $67 more per month to rent a new unit.

NAHB calculated these average home price increases based on the softwood lumber that goes into the average new home, as captured in the Builder Practices Survey conducted by Home Innovation Research Labs.

“With a historically low level of overall housing inventory and solid demand due to low mortgage interest rates and favorable demographics, new construction has been unable to add additional needed supply to the market, resulting in unsustainable gains for home prices,” wrote David Logan, director of tax and trade analysis at NAHB.

There are various reasons for the increase, but the main one is that sawmills are unable to meet demand. Sawmill output fell during the onset of the epidemic, and while it has recovered somewhat, labor shortages continue to be a problem. Compared to the increase in housing starts, sawmill output is significantly behind.

Other factors driving increased lumber costs include supply chain interruptions, levies on Canadian lumber imports, and a particularly active wildfire season in the American West and British Columbia.

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