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Skyrocketing Lumber Prices Could Add $24K to Home Buys. Costa Fires off Letter to Pres. Biden
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By Jim Jakobs, Digital Producer
Published 4 years ago on
March 8, 2021

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Shortages of lumber have nearly tripled the price of lumber since mid-April 2020, according to the National Association of Home Builders.

The association estimates the price of a new single-family home will increase by more than $24,000 as a result. CNBC reports softwood lumber prices are now about 112% higher than they were a year ago.

Reps. Jim Costa, D-Fresno, and Jodey Arrington, R-Texas, sent a letter to President Joe Biden and the Department of Justice on March 4 urging the administration to respond to rising building materials prices and supply shortages.

So far, the trickle-down of high prices isn’t manifesting itself in the Central Valley. At least not yet.

Mike Prandini, president and CEO of the Building Industry Association of Fresno and Madera Counties, says homebuilders work from pre-existing contracts with lumber suppliers that may soften the blow.

“They’re still working on some supplies that they’ve ordered previously,” Prandini told GV Wire℠ by phone Monday. “But it’ll eventually get into the pricing of new homes and and affect the prices.”

Mike Prandini, Building Industry Association CEO

“They’re still working on some supplies that they’ve ordered previously. But it’ll eventually get into the pricing of new homes and and affect the prices.” — Mike Prandini, president and CEO of the Building Industry Association of Fresno and Madera Counties

Boosting Sawmill Activity

Costa and Arrington stressed the need to boost sawmill activity in their letter to Biden and the Justice Department.

“Unfortunately, this unprecedented price increase on new homeowners, as well as homebuilders, will persist until new sawmills come online and current mills re-open and operate at full capacity,” the letter stated. “To address this issue, we ask your Administration to facilitate a discussion with all stakeholders, including sawmills, homebuilders, loggers, and distributors, to ensure all needs are met in a timely manner.”

Housing Starts and Home Remodeling

Increased demand for single-family housing, much of it driven by the coronavirus pandemic, has housing starts up 30% year over year, according to the U.S. Census. That is part of the issue on the demand side.

There has also been a surge in home remodeling, as people sit at home longer and put money they would have spent on going out or traveling into their houses and properties.

Low interest rates are also playing into lumber prices, heating demand for housing and giving builders more incentive to increase production.

“It’s also worth noting, that durable goods are continuing to increase, as individuals are buying large appliances and furniture. This is also helping increase lumber prices because a lot of these items are shipped on wooden pallets,” Joe Sanderson, managing director of natural resources at Domain Timber Advisors, an Atlanta-based timberland investment management organization, told CNBC.

2020 Market Misread

Mill operators and lumber dealers misread the 2020 market. Since housing starts and remodeling were weaker in 2019, they pulled back on production. The expectation was that 2020 would be much of the same.

“COVID hits and they get really, really scared. You saw construction curtailments across the board,” said Paul Jannke, principal at Forest Economic Advisors.

Then came the totally unexpected boom. Housing turned out to be one of the brightest spots in the economic recovery, with demand coming back swiftly.

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