High timber prices eased-Lima News

Home prices are skyrocketing, driven by a combination of record low mortgage rates, strong demand from buyers, and a prolonged lack of new construction.

In 2021, new factors put pressure on home prices. Every month, timber prices jumped to new highs. Wood costs soared by more than 30% from January to May.

However, sawmill prices are finally chilling a bit as sawmills are increasing production to meet enthusiastic demand. In June, timber futures prices fell below $ 1,000, down 45% from their spring peak.

Still, the National Association of Home Builders says high timber prices are still pushing the cost of new homes by thousands of dollars. The trading group lobbyed President Joe Biden and Congress to eliminate tariffs on Canadian timber sent to the United States.

The Ministry of Labor’s Producer Price Index shows that timber more than doubled between May 2020 and May 2021. Prices have tripled in just 12 months, according to the National Association of Homebuilders.

Activities in the futures market are even more spectacular. Wood prices delivered in March are similar to Bitcoin or Gamestop stock price charts.

A series of cascade effects

Home buyers can usually ignore the complexity of the timber futures market and trade policy with Canada. However, the sharp rise in timber prices is affecting consumers.

The National Association of Home Builders has pointed out various setbacks caused by lack of timber. Georgia builders say they have been forced to postpone the start of construction. This is a delay limiting housing supply into the spring sales season.

Alabama builders report that the bill for timber used to build a typical new home has jumped from $ 35,000 a year ago to $ 71,000 today. Reflecting that observation, the National Association of Home Builders said soaring timber prices raised the average new home price this spring by $ 35,872 compared to spring 2020.

In another wrinkle, Kansas builders say they underestimate their homes because appraisers do not consider the price of timber in their analysis.

PulteGroup, one of the country’s largest builders, said it expects to raise prices this year to pass on the rising costs of timber. “Housing costs will rise in 2021, mainly driven by increased timber and labor,” Robert O’Shaughnessy, chief financial officer of PulteGroup, said in a recent earnings call.

Of course, homebuilders aren’t the only buyers of timber. Homeowners who remodel their homes are also diverting part of their supply by building fences, decks, and extensions.

Wood is just one factor in home prices

The dramatic rise in timber prices has caught headlines in recent weeks. But wood costs are just one factor in the complex equation behind home prices.

The biggest factors are supply and demand. The swelling between the US population, especially the millennial generation, who are in their thirties and start their households, is growing faster than the number of homes available. This means that even if timber prices return to Earth, house prices are unlikely to follow.

“Wood isn’t the main reason homes aren’t affordable,” said Alex Baron of the Home Research Center in El Paso, Texas. “It’s a shortage of resale supply — too many homes are still in the hands of landlords and investors. There has been no land development for more than a decade after the crash.”

There is a pile of plywood at the Connecticut work site. Sawmill prices are finally chilling a bit as sawmills are increasing production to meet enthusiastic demand.

The implications for homeowners and homebuyers are:

High timber prices eased-Lima News

Source link High timber prices eased-Lima News

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