Lumber Prices impact House Prices

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CNN Money reported on July 18th, 2017 that lumber prices are soaring and builders are worried.

Lumber in June 2017 cost 17% more than in June 2016.

In a survey in May, 21% of home builders reported shortages of the framing lumber they need, a percentage that matches shortages during the boom years.

Price and availability of lumber has a direct effect on new construction property.

Demand for new homes has been strong eight months in a row, said Robert Dietz, chief economist for the National Association of Home Builders. But because of more expensive lumber, the prices for some homes will go up while they’re being built, and other builders working under contract will take losses, MacDonald said.“It’s not good for anyone,” he said. “It’s going to slow the housing recovery, slow the overall economy.”

Why the Increase?

The usual ratio of “supply and demand” plays a factor.

Housing starts are up 3% this year compared with the same period last year, according to the Census Bureau. And building permits are up twice as much, showing more building plans in the pipeline.

There is also the concern regarding a potential 24% increase in tariffs on Canadian lumber imports.

The [builder] trade group believes such a tariff could drive up the price of an average home by $3,000. The tariff has not been imposed, but the threat alone has driven up the price of lumber, said Rose Quint, an economist with the group.

Another factor is labor. Since unemployment has fallen, there are fewer construction workers available. Furthermore, when the housing bubble burst in 2008, a number of workers left to find alternative work or have since retired.

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CNN Money ‘Soaring lumber prices a problem for home builders, buyers’.