If you're thinking of buying a new home in the near future, you might want to hold off. The price of lumber has tripled within the last 12 months, according to an analysis published last month from the National Association of Home Builders. Due to the material's significance in residential construction, the price of the average new single-family home is also on the rise, too.
Within the past year, the price of a new single-family home has increased by $35,872, per NAHB's report. What's even more startling is how quickly this number has climbed. Last August, the association reported that rising lumber prices lead to a $16,000 average increase in the price of a new home. Assessed again in February 2021, it was reported that roughly $24,000 extra was being tacked on to the price of a home.
So, what's causing lumber prices to spike? The answer is simple: A high demand for the material, but a short supply. As Lawrence Yun, chief economist of the National Association of Realtors told CNN Business: "There was a great fear among sawmills to prepare for a downturn. When home buying surged, they could not open up capacity quickly enough." Not to mention, the uptick in home renovation projects during quarantine definitely added to the demand.
In hopes of regulating these prices, the home building industry is urging President Joe Biden to take further action. In a statement provided to CNN Business, NAHB Chairman Chuck Fowke asked for the Biden administration to "temporarily remove" the 9% tariff on Canadian lumber "to help ease price volatility." He also called on the White House to assemble interested stakeholders for a summit focused on lumber and building material supply chain issues to help identify the causes and solutions for the high prices and supply constraints.
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But besides steep lumber rates, the building industry is also burdened by other challenges that may contribute to how much consumers shell out for a new home or renovation project. In particular, labor shortage appears to be a concern for those in the field. "It's been increasingly hard to find people to work on your jobs," Kiley Baun of Shophouse Design told House Beautiful during a roundtable discussion in February, where architects, contractors, and other experts discussed the current climate of the building industry. "We've been having a hard time even booking builders a year out," she continued. Jessica Pleasants of Godwin Residential Construction and POP Architecture. agreed, adding that "the certain experience and hands-on knowledge that’s required to do technical work correctly is scarce." This plus the increase in cost and pandemic-spurred moves means many projects are more expensive and taking longer than ever before.
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