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Home » Lumber prices and its effect on new construction in Houston

Lumber prices and its effect on new construction in Houston

by Rashidah Ali
Published: Last Updated on

Author 
Rashidah Ali
Berkshire Hathaway HomeServices Premier Properties
Licensed Real Estate Salesperson
rashidah.ali@preproperties.com
www.berkshirehathawayhs.com/

SOARING LUMBER COSTS AFFECTING HOME PRICES!

“To help builders recoup the cost of lumber, new home prices are rising by $15,000 to $20,000.”

New home sales are continuing to elevate across the country especially in Houston. The Finance and Commerce Department observed a more than 20% uptick in sales in March. The cost of buying a home is also rising as demand and the long-term effects of the pandemic creates a costly shortfall of supplies.

As lumber prices reach all-time highs due to the supply shortage, the crisis worsens as housing prices continue to rise and builders face difficulties in meeting emerging housing demands.

Stack of wooden planks in sawmill lumber yard.

“In April, lumber is selling at an all-time high price of approximately 1286.60 per thousand board feet.”

Nothing here is great news for builders or other professional consumers of nearly all grades of lumber, since they need lumber to build, and the building season is ramping up as the calendar turns.

Rising supply costs are greatly affected by the uncertainty when supplies will be readily accessible to wrap up the home on time and whether or not the homes will appraise at the right value to reflect these rising costs.

Those increasing costs are no small matter at all. As new homes are being constructed to meet the demands, the pandemic has disrupted the supply of lumber and other building materials, and no one has been able to catch up.

Since the cost of lumber has skyrocketed, local builders believe that doing nothing is the best option. This could slow or stop new construction for at least a few weeks.

FACTORS INVOLVED

These increased costs are attributed to a number of factors, all of which are caused by COVID-19. 

  • In some places, mills were closed down when stay-at-home orders were implemented.
  • There were assumptions that the virus would have a negative impact on housing and it would reduce the demand, so even mills that continued to operate reduced capacity.
  • Since that did not happen, and there has also been a significant increase in demand, producers have been unable to backfill the inventory.

SOARING LUMBER COSTS AFFECTING HOME PRICES!

Image of engineering objects on workplace top view.Construction concept. Engineering tools.Vintage tone retro filter effect,soft focus(selective focus)

“It’s hard enough finding a place to live in Houston right now, but it appears to be as difficult if you are trying to build a new one.”

As if buying a house in Houston wasn’t difficult enough, it appears that building one is even more difficult, as builders face rising interest rates and higher costs for construction materials such as lumber.

Some customers got the bad news after their new homes had already begun construction. Because lumber prices have risen so dramatically, the builder informed them that they would be unable to honor the original sales price they agreed upon. This affects anyone who needs lumber for anything from a new fence or deck to building a house.

HOW IS IT STILL THE BEST TIME TO INVEST OR BUY A HOUSE?

As a result, with the ongoing supply-demand imbalance, this upward pull on prices is expected to continue in 2021 and even beyond. And it appears that rates will not fall anytime soon; the demand will remain strong for at least a couple of years. As prices continue to rise month after month, it demonstrates the resilience of the housing sector in the presence of a continuing economic recession and higher lumber prices as well. So, even after the increase in lumber prices, now is the ideal time to invest and buy a house because prices are expected to rise further.

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