Soaring lumber prices hiking new-home prices by $24,000

Elevated material costs push builder sentiment down in latest NAHB survey

Want to buy a new home? Get ready to pay a premium of $24,000 thanks to escalating softwood lumber costs, according to the National Association of Home Builders (NAHB).

NAHB chief economist Robert Dietz reported the estimated extra cost tacked on to the price of a new single-family home while commenting on the group’s latest Housing Market Index, which gauges builder confidence in the market. Elevated material prices pushed the index lower despite high demand and stout homebuyer traffic, bringing the index down two points to a reading of 82 in March.

“Builder confidence peaked at a level of 90 last November and has trended lower as supply-side and demand-side factors have trimmed housing affordability,” said NAHB Chief Economist Robert Dietz.

“And mortgage interest rates, while historically low, have increased about 30 basis points over the last month.”

“Supply shortages and high demand have caused lumber prices to jump about 200% since last April,” added Chuck Fowke, chairman of the NAHB. “Policymakers must address building material supply chain issues to help the economy sustain solid growth in 2021.”

While homebuilder sentiment in the current state of the market appears depressed, the industry still anticipates strong activity in the near future. The HMI’s sub-index assessing current sales conditions fell three points to a reading of 87, but the component index measuring sales expectations in the next six months went up three points to 83. The sub-index gauging builders’ view of prospective buyer traffic was unchanged at a reading of 72.

Dietz noted that the pool of buyers looks to remains solid with supply of existing homes scarce.

“The lack of resale inventory means new construction is the only option for some prospective home buyers,” he said.


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