Wood is a favorite choice for home builders who want that unique theme and ambiance. However, soaring lumber prices in the US have ignited unrest in timber industries. This is a cause of concern for the National Wood Products company, builders, and homebuyers alike.
What’s more? The impact is already trickling in the housing sector.
When the coronavirus pandemic struck early last year, lumber prices slumped, and no one cared about construction. This left mills with excess wood supplies with few or no buyers. However, construction activities have resumed, and with a bang. As a result, timber mills are grappling to meet the demand, and prices have hit a surprisingly high.
What are the exact causes of high lumber prices?
As per the National Survey of Home Builders, lumber prices skyrocketed by 30% between 2017 and January 2018. The prices are still soaring, and the Covid 19 pandemic continues to worsen the situation. The pandemic has destabilized demand and supply, thus creating chaos in the lumber marketplace.
With the Covid 19 pandemic, the demand for lumber in construction projects keeps rising amidst low lumber supply. According to a letter by Plywood & Interior Surface Specialists, safety protocols have led to slower production. Changes in work habits and employee absences due to Covid 19 are also to blame.
Still, there are other demands like DIY deck projects for use during these difficult times. What’s more? Restaurants and eateries are using lumber to create additional outdoor seating space. Another factor is the rising cost of things like labor, transportation, containers, and more.
How will high lumber prices affect homebuyers?
Lumber is common in most construction projects in the US. Undoubtedly, slight price increases can negatively impact the housing sector, and home buyers have to bear the brunt. Here are impacts;
- High cost of housing
The cost of building materials is a significant determinant of housing prices. Statistics show that since the beginning of 2020, lumber prices have risen by about 130%, significantly increasing home costs, with single-family homes going for approximately $16,000. Quite high? Of course, and we still don’t know what the future holds.
- Contract re-negotiation
With the high cost of limner, builders may not be willing to give discounts on home prices. However, builders on a low budget may have to renegotiate contracts with buyers. And this involves revisiting modern finishes like flooring, countertops, and room sizes. This will reduce the cost of budgeting, translating to an affordable price for buyers.
- Few housing choices
There are different types of houses, ranging from castles, bungalows, apartments, cabins, chalets, and more. Builders have fewer choices regarding housing options and may have to forgo the most expensive options to offer homebuyers affordable choices.
- More buildings in suburbs
Homebuyers will have limited options when it comes to housing in high-end urban areas. For now, suburbs are highly likely to offer competitive land acquisition rates, which will undoubtedly attract more builders. And we expect more construction works in such low-cost areas in the future.
The high cost of lumber has affected the construction sector in numerous ways. Homebuyers are left with fewer housing options and must cough up more dollars to acquire their dream homes. Should we brace ourselves for more challenging times ahead? Probably yes!