Buyers who purchase newly constructed homes are paying more not only because of intense competition in the market but also surging lumber prices. Record-breaking growth for the cost of lumber is pressing on builders’ budgets and prompting them to pass along price increases to buyers.
The increase in lumber prices over the past year has added $35,872 to the price of an average new single-family home and $12,966 to the price of an average new multifamily home. The latter translates to an extra $119 per month in rent for apartment dwellers, according to new housing data from the National Association of Home Builders.
Some builders report slowing production due to the rising building costs. Still, single-family housing starts jumped 41% in March compared to a year earlier, according to U.S. Census Bureau data. More than a quarter of single-family homes that were on the market in the first quarter of this year were new construction—the highest share on record, according to Redfin research.
But lumber prices—up a whopping 340% compared to a year ago, according to Random Lengths, a wood products industry tracking firm—threaten that market share. For a new home, lumber is often used for framing as well as for cabinets, doors, windows, flooring, and decks.
Builders are facing rising costs for other building materials, too. For example, year-over-year prices are up nearly 7% for drywall, 27% for copper—the price of which set a record high this month—and 11% for land prices. Prices for single lots especially have jumped this year due to high buyer demand and low supply.
“There’s a literal land grab going on as builders are scooping up lots to better match housing supply with demand,” Ali Wolf, chief economist at Zonda, told CNBC. “The lot supply shortage is real, and it is causing prices to rise and builders to move further into the suburbs.”