Fluctuations in the prices of building supplies are complicating construction of new homes.
The price of a key building material is more unpredictable today than it has been since the end of World War II. And that should worry home buyers and renters alike.
Rising prices are one problem, but volatility is another. Over the course of the pandemic, lumber prices have fluctuated dramatically. Between 1947 and 2019, the monthly change in the price of softwood lumber averaged 0.3%. Since January 2020, though, it has averaged 12%. — Robert Dietz, chief economist at the National Association of Home Builders That volatility is producing ripple effects throughout the housing market — a market that is currently struggling due to the record-low inventory of homes for sale.
“As goes the lumber industry, so goes pacing and pricing of single-family home-building,” Dietz said. — Odeta Kushi, deputy chief economist at First American Financial Corp. “Higher costs for lumber and other building materials are often passed on to the buyer in the form of higher new-home prices,” said Odeta Kushi, deputy chief economist at First American Financial Corp. “The challenge for builders is how they deal with higher material costs, while keeping new house prices within reach for buyers, particularly in a rising-rate environment.
Of course, lumber isn’t just used to build single-family homes. It’s also used to remodel existing homes and to frame individual apartments in multifamily buildings. So to the extent that those activities are also slower or more expensive because of the availability and pricing of wood, it will have ripple effects into the rental market, too.
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