The soaring prices of lumber, up a whopping 180% in the past year since spring 2020, is being described as a “crisis” by home builders.
According to the National Association of Home Builders (NAHB), the top challenge facing single-family home builders this year in 2021 is cost of building materials. Reportedly 90% of builders indicated this problem in a December NAHB 2020 survey. The association says the number two problem is the availability of building materials.
Lumber Prices Hit Record High, Adds $24,386 To Price Of New Construction Home
The NAHB indicated in late February 2021 that the price of an average new single-family home has gone up by $24,386 since April 2020. This estimate is based on “standard estimates of lumber used to build the average home.”
Cost increases are also being felt by those who stay put, opting for a home renovation instead, or smaller home do-it-yourself projects.
Supply Shortages, Construction Delays
In a booming building market (like conditions in Florida), builders can run into supply shortages. Such an environment causes delays in the time it takes to build a new home. These days, potential home buyers should anticipate that a builder’s initial estimate from contract to move-in date could get pushed further out by months due to market conditions.
Problems Getting Appliances, Too
Builders have been reporting something more unusual in recent months. According to NAHB survey results, builders have additionally been complaining about getting new appliances. Last month’s survey in February 2021, indicated that close to 90% of builders said “they had experienced such a difficulty — 51% to a major extent, 38% to a minor extent.” Waiting on delivery of appliances can also cause further delays in move-in/closing dates.
Market For New Single-Family Homes
Even with the market challenges home builders face, builder confidence reportedly remains high with strong demand for homes offsetting higher construction costs — for now at any rate. This is the recent sentiment, according to the NAHB/Wells Fargo Housing Market Index (HMI). In February 2021, the measurement of builder confidence was up a point to 84, with “strong buyer demand” said to be helping to offset soaring lumber prices and supply chain challenges.
Explanation of the HMI
What do the points reflect? The NAHB/Wells Fargo Housing Market Index (HMI) is a monthly survey of home builders. If all respondents answered “Good/High” then the index would be 100. If all respondents answered “Poor/Low” then the index would be 0. If equal numbers of respondents answered “Good/High” and “Poor/Low”, the index would be 50. Any number over 50 indicates that more builders view sales conditions as good than poor.
With the supply of resale/existing homes for sale at low levels here in northeast Florida, potential home buyers have competition to purchase and a shortage of options. Thus, model homes have been busy with buyers contracting to build, even though time to closing/move-in date is getting more drawn out. (Available single-family rental properties are also scarce these days in the marketplace.)
Long-Term Effects Of High Lumber Prices
On March 1, 2021, the National Association of Home Builders’ Chairman, Chuck Fowke, gave a virtual presentation, “Chairman’s Update,” about the lumber crisis. He stated, “high lumber prices remain the number one issue facing and threatening home builders.” Also, “the long-term effects of these sustained high prices will be devastating for home builders and for home buyers.”