Surging lumber costs have increased the average cost of a new house by $24,000
- Lumber prices have skyrocketed since the pandemic began, adding $24,000 to the price of new homes.
- Demand for materials soared during the pandemic as supply tightened with factories idle.
- The National Association of Home Builders chair said vaccine rollout should help bring costs down.
While the pandemic hit the US, everyone seemed to want their own house. With mortgage rates at record lows and no need to commute to work in cities for at least 2020, prices soared everywhere. But they're also soaring because there isn't enough wood out there: lumber, to be exact.
Now it's clear how much the lumber shortage is adding to the skyrocketing price of new homes: a whopping $24,000.
That stat is courtesy of the National Association of Home Builders (NAHB), which found the price of an average family home increased by $24,386 since April, with the market value of a multifamily home increasing by $8,998 over the same time period.
A report from the NAHB in February said the lumber supply chain impact came as factories shut down almost immediately last March for safety reasons, and then as demand spiked, supply couldn't keep up. Lumber prices have jumped by almost 200% since April 2020.
"The elevated price of lumber is adding approximately $24,000 to the price of a new home," NAHB Chairman Chuck Fowke told real estate news site HousingWire. "Though builders continue to see strong buyer traffic, recent increases for material costs and delivery times, particularly for softwood lumber, have depressed builder sentiment this month. Policymakers must address building material supply chain issues to help the economy sustain solid growth in 2021."
Zillow's Producer Price Index found that February's 2.8% annual increase in sales was the strongest it had been since October 2018, meaning that while more houses are being sold, supply for building materials, like lumber, remain low and costly.
On March 12, the NAHB, along with more than 35 other housing organizations, wrote a letter to Commerce Secretary Gina Raimondo asking her to examine the lumber supply chain and look into solutions for the high costs.
"Housing and construction can do their parts to create jobs, boost the economy to its pre-pandemic strength, and provide safe and affordable housing for all Americans, but in order to do so the federal government needs to address skyrocketing lumber prices and chronic shortages," the letter said.
Building 1,000 average single-family homes creates 2,900 full-time jobs and generates $110.96 million in taxes and fees, the letter said, emphasizing the economic benefits the government would reap in finding solutions to the expensive building materials.
Fowke told HousingWire that the continued rollout of COVID-19 vaccines will help decrease the costs of lumber since more mills will be able to safely reopen, and with more homes being built, home builder confidence should rise. (Homebuilder confidence fell by two points in March.)
The timeline on when material prices will decline is yet to be determined, but prices might start to come down with President Joe Biden on Monday promising 100 million COVID-19 shots in the next 10 days.
"Shots in arms and money in pockets - that's important," Biden said.