The Lumber Price Roller Coaster

Lumber prices are surging once more. You might remember when they hit a staggering level last spring. They aren't back up to that level yet, but this new surge is, again, adding thousands of dollars onto the price of a new home and making homes that much less affordable. Hi, I'm Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review. The National Association of Home Builders reports that lumber prices have almost tripled over the last four months. That's adding more than $18,600 to the price of an average new single-family home, and about $7,300 to the market value of a multi-family home. The multi-family price hike translates into about $67 dollars a month more that tenants have to pay in rent for a new apartment. (1) Lumber Price Look-Back The lumber price roller coaster began at the start of the pandemic when sawmills shut down in step with the Covid lockdown. Back then, most people thought that the housing market would suffer as COVID spread, and that home construction would grind to a halt. But it was just the opposite. Housing demand began to soar and sawmills couldn't ramp back up fast enough. According to the NAHB: "The slow reaction by sawmills, combined with a massive uptick in demand from do-it-yourselfers and big box retailers during the pandemic resulted in lumber prices peaking at a record-shattering $1,500 per thousand board feet in May 2021, before beginning a gradual decline through late August." The NAHB says lumber prices have gone back up 167% since August, to more than $1,000 per thousand board feet. But it isn't just a matter of saw mill response. The NAHB lists several reasons including supply chain disruptions, a doubling of tariffs on Canadian lumber imports, and an unusually damaging wildfire season in the Western U.S. and Canada. NAHB Response The NAHB says it is working with the White House, Congress, and lumber producers to help resolve those issues, and bring prices back down to earth. NAHB actions include a letter to Commerce Secretary Gina Raimondo last month about the doubling of Canadian lumber tariffs. It was signed by 84 members of Congress, and asked that the U.S. resume negotiations with Canada on a new trade agreement for lumber. It says the association leaders also met with Canadian officials at the embassy in Washington, D.C. to emphasize the need to restart negotiations. In early December, the NAHB sent a letter to President Biden in support of a new trade agreement. The NAHB would like to see immediate action in three areas. Those include: The removal of tariffs for lumber and other building materials such as steel and aluminum from China. The elimination of bottlenecks at seaports that are preventing the free flow of goods and materials. And, solutions to delays in transportation by trucks and trains. The NAHB says it's important to address the price issue for all construction materials, and not just lumber. It says the average price growth for home construction materials was about three times the rate of inflation in 2021. The situation isn't hurting builders. As the Wall Street Journal points out, they have no trouble raising prices to cover their costs. Layman's Lumber Guide analyst, Matt Layman, says: "They know they can pay $1,500 for two-by-fours. They didn't like it, but it didn't hurt them." (2) Without the kind of intervention that the NAHB is advocating, analysts expect to see prices climbing higher through the winter as builders ramp up for the spring season. Many are loading up on as much lumber as they can for fear that prices will climb even further. If you want to learn more about what the NAHB is doing, and how you can express your opinion on what needs to be done, look for a link in the show notes at newsforinvestors.com. You can also join RealWealth, for free. As a member, you have access to the Investor Portal where you can view sample property pro-formas and connect with our network of resources. That includes experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more. And please remember to hit the subscribe button, and leave a review! Thanks for listening. I'm Kathy Fettke. Links: 1 -https://nahbnow.com/2022/01/latest-wave-of-rising-lumber-prices-adds-more-than-18600-to-the-price-of-a-new-home/ 2 -https://www.wsj.com/articles/sky-high-lumber-prices-are-back-11639842879