According to the National Association of Home Builders, “Lumber prices have skyrocketed nearly 250% since April 2020, causing the average price of a new single-family home to increase by $36,000.” Like many people, we’re sure you are curious about why lumber costs are rising, and why they don’t seem to be stopping anytime soon. We decided to do a deep dive on why the price of lumber has increased and what it means for the future of real estate.
The biggest one being the pandemic.
When the pandemic brought everything to a halt, the lumber and sawmill industries took a large hit. Prices dropped and many businesses were forced to close their doors. According to The Wall Street Journal, by April 2020, 40% of North America’s sawmill industry was shut down.
Many mills were forced to reduce production last year during the stay-at-home ordinance and had to employ less workers due to the social distancing measures in place. Less workers = less productivity. When the market started to heat up again, businesses found themselves needing to start building outdoor patios and decks for socially distant seating. There were barely half the resources left to start production up with. This led to there being an increase in demand and a decrease in supply, which as you learned in economics 101 caused prices to go up.
Wildfires: On the West Coast, wildfires have ruined large supplies of timber which contributed to causing the output of lumber to decline.
Real Estate Market: The decrease in available homes has forced lumber prices to soar. More clients are looking to build homes rather than buy them because it is easier than going head-to-head with multiple offers on a home that is not exactly what you want.
Beatles: A lesser-known fact that increased lumber prices was the infestation of Mountain Pine Beatles in British Columbia during the summer of 2020. The beetles destroyed 15 years of log supplies that was meant to build millions of homes. Beatles destroying forests is not a new issue and has been a problem for decades.
So, what does this mean for the future of real estate?
Things could be looking up. Now that social distancing measures are decreasing, mills can bring back in their staff and are hiring more to help bring production up to where it was before the pandemic hit. It is also possible that we have moved past the peak of lumber prices, and they can only go down from here.
New mills are reopening and adding on to their current capacity all over the south. Unfortunately, this will take a few months to a year before we can start seeing the output of lumber from these facilities.
According to Frank Morris on NPR, sales of new single-family homes decreased by 18% in February. The number of new constructions sites also dropped by 10%. This partially has to do with the inflated price of lumber causing new construction homes to be out of many peoples price range. A decrease in demand will hopefully help the supply and demand level out.
Many people are looking into alternatives that are more environmentally friendly, like upcycled plastic, hemp, cork, and bamboo. This is the perfect opportunity to start getting creative with construction! Go green with your materials!
Bamboo is a great option because it is technically considered part of the grass family. It grows quickly and is very renewable. Bamboo is also strong and easy to deal with. Cork is another great alternative. It is made from the bark of a cork oak tree. This means the tree is not cut down in order to be used. The bark around the tree is shaved off and the tree is left to regrow bark. A perk of cork flooring is that it’s noise cancelling and has natural thermal insulation which helps with energy costs!
Either way, the increased lumber prices look like it is going to be staying around for a while (at least until 2022).
A huge upside to all of this is that if you already own a home, its value has increased a significant amount, and now is the best time to sell! If you are ready to sell your home, contact Prime Realty today. We can help you determine the best price for your home and get it in perfect selling condition! Read our blog, “Prime Realty’s Checklist for Sellers,” to learn about the process of selling your home and how hiring an agent will help you!