The rising lumber costs has added $35,872 to the price of an average single-family home and $12,966 to the market value of an average multifamily home, according to the National Association of Home Builders latest estimates. This added cost to multifamily homes will translate to an added $119 a month to rent a new apartment.
The increasing costs of building materials, including lumber, have been putting a strain on the homebuilding industry and the housing market. With demand for housing outweighing available housing inventory, home builders are feeling the pressure to increase construction; however, without recourse, they are forced to either eat the costs or pass it on to their buyers.
The data collected by the NAHB was based on softwood lumber, which is used directly and embodied in products used to make a new home, according to Home Innovation Research Lab’s Builder Practices Survey. This can includes many facets of new home construction from structural framing to flooring to interior finishings to landscape walls.
Since home builders and construction firms tend to obtain their softwood lumber from lumber yards and saw mills, the products are marked up to account for the manufacturer’s margin, specifically by the percent difference between receipts and cost of goods.
These increasing costs are not only putting home builders in a tough position, it is also affecting home affordability.
According to an article by Paul Emrath for Eye on Housing, “Based on NAHB’s standard priced-out calculations, the $35,872 increase in the average new home price (taken from the latest HUD/Census Bureau new residential sales report) has priced more than 5.5 million U.S. households out of the market, meaning that these households could qualify for a mortgage to buy the average new home before the price increase, but not afterwards.”
With President Biden making affordable housing a focus on his most recent legislative push, the American Jobs Plan, and the housing market continuing to stay hot, some housing organizations have even gone as far as asking the government to intervene on the rising costs of lumber.
As low interest rates and proposed tax incentives help the demand-side of the housing market, the supply-side is in need of aid to continue staying afloat.