Runaway Lumber Costs Send New Home Prices Soaring

Number of the Day: The most relevant or interesting figure in personal finance

NOTD $35,872

The Balance

That’s how much the price of an average new single-family home has increased in the last year because of the surge in lumber prices, according to the National Association of Home Builders (NAHB).

The price of framing lumber has risen more than 250% in the year through April 29, a response to surging demand for new construction (part and parcel of a massive shortage of existing homes for sale) and tariffs on Canadian lumber imports, according to the NAHB.After shutting down when the pandemic first hit in the spring of 2020, lumber mills didn’t ramp up production fast enough to meet the unexpected demand within the do-it-yourself market, the NAHB said. An estimated 5.5 million fewer households would qualify for a mortgage now than before the increase, the group said.

The surge to record highs is not only making it less affordable for homebuyers, but for renters too. The average price of a new multi-family house has risen $12,966 over the past year, adding $119 more a month to the typical monthly rent, the group said. The price tag has gone up more than $10,000 for single-family homes and almost $4,000 for multi-family just since mid-March, and just in the week or so since the NAHB made its calculations, the price of lumber has increased another 8.6%. 

The NAHB and others in the housing industry say the skyrocketing lumber prices are “threatening the economic recovery,” hurting consumers as well as the home builders and construction firms who are in some cases forced to absorb the increases in fixed contracts. 

“There is a significant risk that many of these firms will be forced out of business,” NAHB and more than 35 other real estate trade and advocacy groups wrote in a letter last month to U.S. Secretary of Commerce Gina M. Raimondo. NAHB has called on President Joe Biden’s administration to help increase production and end tariffs with Canada.