Prices for lumber have surged more than 200% since June, 2020, adding an estimated $36,000 to the price of an average new single-family home, according to the National Association of Home Builders.
The rising and volatile costs of lumber continue to hamper the new-home and remodeling markets. Lumber prices nearly doubled over a four-month period in 2020 and have continued to reach new highs. The price and availability of building materials have been cited as one of the top challenges that homebuilders face at a time when
the real estate industry is calling for more housing inventory to meet surging buyer demand.
Forty-seven percent of builders said they were “including price escalation clauses in their sales contracts” to help protect themselves from ongoing price increases in the lumber market, according to recent builder and housing surveys.
Builders are pre-ordering lumber to help avoid cost increases, and 22% are obtaining price guarantees from suppliers. But those price guarantees don’t often stretch past two months.
The sky-high prices may soon back off: Lumber futures have posted slightly weaker numbers as of early June.
Even as prices edge down slightly, they will still be well above historic averages, even as much as twice the average compared to the past 20 years.
Believing that a decrease in lumber pricing is inevitable as higher prices tame demand, some builders are recommending a delayed start of home building projects until fourth quarter, 2021, or first quarter, 2022.
How is the Northern Colorado New Home Market Affected?
Dana Spanjer with Spanjer Homes indicated that uncertainty surrounding COVID and recent price increases have delayed spec home construction for as much as a year. Material escalation clauses are included in their contracts for clients building custom homes.
Alexa with Landmark Homes reported one listing being released at a time for contract in each of their seven Northern Colorado communities and sale prices are subject
to material pricing. Build time is 8-10 months after the initial 1-2 month process of obtaining permits.
Jim Hauan, REALTOR representative for Sage Homes, shared that lot reservations are converted to contracts after completion of the foundation so the home can be priced with current lumber costs in mind. Turn around time from contract to close is 11 months.
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