Soaring lumber price adds nearly $19,000 to the cost of a new home
The price of lumber has been on a roller coaster since the start of the pandemic, and it’s climbing a big hill yet again.
After falling back sharply from a record high in May of last year, lumber prices began climbing again in December. They are now about 22% lower than that peak, but still about three times their average pre-pandemic price, according to Random Lengths.
That is adding to the cost of both building a new home and remodeling an older one. The National Association of Home Builders estimated the recent price jump added more than $18,600 to the price of a newly built home. It also added nearly $7,300 to the cost of the average new multifamily home, which translates into households paying $67 a month more to rent a new apartment.
A worker stands on the roof of a home under construction at a new housing development in San Rafael, California.
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 several reasons behind the inflation, but it’s mostly that sawmills can’t keep up with demand. Sawmill output dropped at the start of the pandemic and while it has recovered some, it is still plagued by labor shortages. Compared to the increase in housing starts, sawmill output is significantly behind.
Other issues inflating lumber prices include ongoing supply chain disruptions, tariffs on Canadian lumber imports and an unusually strong wildfire season in the American West and in British Columbia.