New home prices are soaring, and there’s a reason you may not be aware of: the rising cost of lumber! Even home projects such as fences, decks, and finished basements will see higher price tags overall.
Why are lumber prices so high?
First things first, the pandemic has wreaked havoc on a number of industries, and lumber is no exception. The supply and demand mismatch has caused the prices of lumber to soar. State-mandated lockdowns caused mills to halt production plus social distancing requirements have made it difficult for employees at the mills to perform their jobs, in turn further slowing production.
In addition, Lowes and Home Depot have been bombarded by bored Americans ready to do those home projects they’ve put off. Other people decided to finish basements to create much needed extra space in homes where people are now teleworking and homeschooling. The lumber inventory then plummeted. Record-low interest rates plus a shortage of homes for sale have led many buyers to look at new construction, which of course requires a lot of lumber, further worsening the already short supply. Builders can’t keep up with buyer demand— add that in with the rising prices and lack of lumber overall, and you’ve got a problem.
How high are lumber prices really?
The latest Random Lengths prices as of the week ending on April 23 show the price of framing lumber near $1,200 per thousand board feet — up nearly 250% since last April when the price was roughly $350 per thousand board feet.
Gary Seabolt of Pikes Peak Construction, a small general contractor in the Springs, said his company recently purchased a single sheet of 4-foot by 8-foot plywood from a local home improvement store — the same kind of material that do-it-yourselfers might purchase for a weekend project. In March 2020, the price for the plywood sheet was less than $10, Seabolt said. Today, it’s more than $56.
How is the price of lumber affecting real estate?
The National Association of Home Builders said two months ago that soaring lumber costs have added $24,386 to the price of an average single-family home since mid-April of last year. In Colorado Springs specifically, the Gazette states, “At Vanguard Homes, prices spiked an average of $80,000 per house from July 2020 to February of this year. Higher costs for land, labor and insurance are part of that figure, but lumber alone added $26,000 — nearly one-third of the $80,000 increase” said owner and president Mark Long.
The demand has remained strong for new construction despite rising costs, mostly because there’s just not enough homes for sale. The real estate inventory in the Pikes Peak Region has plunged to record lows, with last month only having a 10 day supply of homes.
Even resale homes are seeing steep price increases. The median and average home prices reached record highs last month. Buyers are pretty limited– they can try to compete in a bidding war or turn to a builder for a brand new home. Either way, it’s going to cost a pretty penny.
Where do we go from here?
Demand for homes does not seem to be waning any time soon– especially with historically low interest rates. Even with rising prices, buyers can afford more house than ever before! Waiting to purchase can cost you– homes are seeing double-digit price increases year-over-year. Waiting even a few months may mean a higher payment. While experts agree that we may see more homes for sale once the economy fully opens back up and more people are vaccinated, this shortage of homes may continue for a while.
So if you are thinking of buying, don’t delay– it will end up costing you. Please contact us so that we can help you find your dream home! And those crazy prices? They are here to stay for a little while.