A record number of prospective homeowners are trying to build a home, but the skyrocketing price of lumber is making that pricier than ever before.
If you didn't know already, the housing market is wild.
Ongoing record low interest rates set by the Federal Reserve during the pandemic have spurred a mad dash to take advantage of buying up homes. This has led to record low inventory for existing homes and fierce competition to get one.
People are paying upwards of $100,000 over asking price or paying upfront with hard cash to beat out others in buying a home. In this lean housing market, sellers report receiving dozens of offers within hours of listing their property.
And if you’re thinking that building a house might be a better option, you might be running out of luck there, too.
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A record number of prospective homeowners are trying to build a home, but the skyrocketing price of lumber is making that pricier than ever before.
According to CNBC, lumber has just hit an all-time high of $1,686 per thousand board feet this month. That's a 406% surge over the same time last year, when it was at just a little over $300.
According to the National Association of Home Builders, the surge in lumber prices has added nearly $39,000 to the price of an average new single-family new build home and about $13,000 to a multi-family home.
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Local real estate expert Mark Johnson, who is the CEO of JPAR Brokerage of Texas, spoke about the dilemma he’s seeing consumers struggle with right now.
"With the lumber supply, it just simply cannot catch up despite a 13 year production high," he said. "According to the National Association of Realtors, it would take years to catch up with demand."
He said some people are having trouble meeting the new quota that is being suddenly added onto their home build price once the current cost of lumber is factored in.
"In all cases, nobody likes a surprise, in terms of the price of what you're paying for,” he said. "Many builders, what they're doing is not pricing the home until the foundation or the slab is poured. And then, they don't know what the costs are. So we're seeing contracts for the consumer being based on certain things like price change. Where they have the ability to back out of the sale or to continue once they know what the real price will be."
Johnson said lumber costs are being driven up by a number of things happening all at once.
There are worker shortages at lumber yards, alongside rising lumber tariffs from Canada, where most of the U.S. gets its supply.
The pandemic itself caused production to shut down for a time and lumber yards have struggled to keep up. That means inventories are depleting due to skyrocketing demand.
"There’s also an increase in demand for remodeling," said Johnson. "Since people have been home during the pandemic, people are seeing the imperfections in their home or their deck and so there’s an increase in remodeling. And that’s putting more pressure on the lumber besides new construction."
According to CNBC, about 1 in 4 homes for sale are now newly built, the highest share ever.
Historically, new homes make up about 1 in 10, but fierce buyer competition is behind that shift. Prices for new and existing homes are at record highs.
