Why are lumber prices so high?
Are you planning a home improvement project or thinking about building a new home? The price of lumber is at an all-time high. The price of wholesale lumber has risen over 200% this past year.
When the economy was shut down last year, sawmills sent workers home and slowed production. By April 2020, roughly 40% of North America’s sawmill capacity was shut down. At that same time, rising home prices and low rates were helping existing homeowners refinance mortgages to pocket cash without adding much to their payment. Experts estimate that Americans last year withdrew nearly $153 billion from their homes in cash-out refinancings. Vacation options were limited by the pandemic, and people were spending more time at home so a remodeling boom hit. Homeowners were also doing more projects like decks to increase their outdoor living space.
Prices have soared so quickly, even changing from the time someone put wood in their cart to when they made it to the checkout! This makes it difficult for builders to give homebuyers an exact quote upfront anymore. It is not just lumber, almost all home-building products, including plumbing, electrical and drywall are a lot more expensive. This is a result of several factors including pent-up demand, trucking bottlenecks, lumberyard shutdowns, and low interest rates.
Demand hasn’t declined by soaring prices. Builders are reporting record home sales, with housing starts up 17% just between May and July. According to Business Insider, you can easily add $24,000 to the cost of the average $350,000 home.
It is hard to imagine what could cause lumber demand to drop and prices to moderate in the foreseeable future, but experts are hoping prices and the building frenzy will ease slightly this fall as more lumber becomes available (since there is no tree shortage).
If you are planning a home project, you can figure that the cost will be higher than what you were expecting. Your options are to see if you can lock in the price, or scale it back a bit in size. Or wait and hope that prices come back down to earth next spring. On a positive note, interest rates have remained low which helps when building a new home.
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