Lumber prices have gone through the roof this year.
There’s a shortage and price increase for everything from windows to appliances to electrical wire.
Nationally, BusinessInsider says, the skyrocketing price of lumber alone has added $24,000 to the cost of an average home.
And that’s just the lumber.
So, builders are building fewer homes this year, right?
Richard Stallings, executive officer of the Home Builders Association of Owensboro, says local builders secured 91 permits for single-family homes in the first quarter of this year.
That’s up from 68 during the same period last year.
And that had been the best first quarter in five years.
There were 60 permits in the first quarter of 2019, 46 in 2018, 50 in 2017 and 51 in 2016.
And builders picked up another dozen permits for single-family homes last week alone.
There’s a reason for that, Brandi Baker, co-owner of Steve Baker Building and president-elect of the HBOA, said last week.
“Housing prices are up,” she said, “but interest rates are so low that it’s still better to build now. Eventually there will be a tipping point, but we haven’t reached it yet. People can get more out of their existing homes now. The price of a new house is higher, but so is what you’ll get out of your existing house.”
Local Realtors say there’s a shortage of homes on the market and almost every house is getting multiple offers — and many are selling for more than their listing price.
Builders are finding it hard to estimate the price of a new house with costs going up — sometimes almost daily — this year.
Baker said, oriented strand board, commonly called OSB, which is used in subfloors and roof decking, was under $8 a sheet a year ago.
A month ago, it was $25.99, she said.
And on Wednesday, the price was $39.99, Baker said.
Richard Stallings, executive officer of the HBAO, said the price increases began a year ago, when the coronavirus pandemic shuttered lumber mills as well as companies that make many of the other products that go into a new home.
Fortune magazine recently wrote, “From the onset, the pandemic was a perfect storm for surging lumber prices. At the same time that sawmills were limiting production during the early months of the crisis, the pandemic was spurring a do-it-yourself boom among Americans stuck at home.”
It added, “That supply and demand mismatch was made worse by record low interest rates and a historically tight existing housing inventory, which caused buyers to rush to new construction. The backlog is so big that prices aren’t falling despite wood production hitting a 13-year high in February.”
“Our national organization is asking Congress to investigate price-fixing,” Stallings said.
He said 1,000 feet of lumber was in the mid-$300s in July.
Wednesday, it closed at $1,292.
“We’re seeing increases in almost everything,” Baker said. “From the time we bid a house until it’s finished, the change has been drastic. Appliances are up 25% to 30%. Electrical wiring fluctuates with the market. There’s a shortage of so many products.”
She said, “We have to order garage doors, especially wooden ones, four to six weeks out because it takes that long to get them.”
Stallings said there’s a shortage of windows and insulation, even mortar mix, this year.
As prices rise, Baker said, “Some people are deciding to wait two or three years for extras like a screened-in porch. They build the porch now and wait to screen it in.”
‘So many shortages’But she said, “The higher prices haven’t stopped anyone from building. The builders are all covered up. It’s a good year, but a challenging year. There are so many shortages.”
Stallings said the bottom fell out of the housing market during the 2008 Great Recession.
“We’re just now reaching pre-recession levels” of building homes, he said.
The Fortune article quotes Dustin Jalbert, senior economist at Fastmarkets RISI, saying, “The pipeline for lumber and other wood products demand remains quite deep in 2021. Builders have plenty of ongoing projects to keep working through, which is keeping lumber and panel demand high, and making it very difficult for mills to ramp production up fast enough to rebalance the market.”
BusinessInsider says lumber prices have soared more than 250% in the past year and 348% since March 30, 2020.
Bloomberg reported that a plague of pine beetles in British Columbia also destroyed enough trees to build millions of single-family homes.
And Devin Stockfish, the CEO of Weyerhaeuser, told Bloomberg that he expects lumber prices to remain elevated “for the foreseeable future.”
Keith Lawrence, 270-691-7301, firstname.lastname@example.org