Rising Lumber Prices May Affect Home Affordability

July 16, 2020
New home lumber frame with blue sky in background
By Alexandr Ivaschenko

When construction returned in full-force, lumber mills were not prepared to meet the demand. And with heightened demand comes heightened prices. In the past six months alone, lumber prices have increased by nearly 60%, according to MarketWatch. Mix in the tariff on Canadian lumber and these rising prices could impact home affordability for potential buyers. To make up for high lumber costs, newly built homes may see higher prices and builders may try to negotiate contracts. MarketWatch also notes that many builders are shifting from the top of the market to the middle, and high lumber prices means tighter margins for those projects.

Adding to the constraints caused by the pandemic, the impact of tariffs on wood from Canadian mills continues to cause elevated prices for American construction firms.

That sudden rise in prices could have major implications for the home-building industry. 

“Framing lumber makes up roughly a fifth of the materials cost of building a home,” said David Logan, director of tax and trade analysis at the National Association of Home Builders. “When we see a price increase this large over such a short period, it’s going to have negative effects on affordability for prospective home buyers.”

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