Soaring Lumber Prices Add $36,000 to Cost of a New Home - Politics Forum.org | PoFo

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#15170202
A shortage of lumber and land is greatly driving up US housing prices.

Part of the problem is long-term population growth putting strain on limited natural resources. But the more immediate problem is due to a mismatch in supply and demand.
The coronavirus pandemic and the economic shutdown that came along with it, combined with industry expectations that demand would not go back up anytime soon, have resulted in the current shortages.

Keep in mind there is also the very real possibility rising housing prices could be an indicator of inflation.

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Soaring lumber prices add $36,000 to the cost of a new home, and a fierce land grab is only making it worse
April 30, 2021

The surge in lumber prices in the past year has added $35,872 to the price of an average new single-family home and $12,966 to the market value of an average new multifamily home, according to the NAHB.

"We have seen, over the last four or five months, what I have never seen in my career before, is lumber to move to the level it has," said Sheryl Palmer, CEO of Taylor Morrison Home.

New lot supply is down 20% from a year ago, according to Zonda.

As the housing market gets leaner, potential buyers are turning in record numbers to new construction, but several factors are making those homes pricier than ever before.

First is a major shift in the market’s composition due to the record shortage of existing homes available. About 1 in 4 homes for sale are now newly built, the highest share ever. Historically new homes make up about 1 in 10, but fierce buyer competition is behind that shift. Prices for new and existing homes are at record highs.

But it is not just competition fueling prices for new homes. The cost of what goes into the home is adding to it as material and land prices surge.

Lumber prices seem to set a new record almost daily, now up 67% this year and up 340% from a year ago, according to Random Lengths, a wood products industry tracking firm. And lumber doesn’t just go into framing a house. Those added costs hit cabinets, doors, windows and flooring.

Lumber prices are skyrocketing for various reasons beyond just high demand from homebuilders and remodelers. Lumber tariffs had prices already rising a year ago, but then when the pandemic hit, production shut down. The expectation was that housing demand would dry up for a long time. But instead, after a brief pause, it came roaring back. Homebuilders were caught off guard, as were lumber producers.

The price per single lot is up 11% this year compared last year, because demand is so high and supply is low. New lot supply is down 20% from a year ago, according to Zonda, a real estate data and advisory firm.

"There’s a literal land grab going on as builders are scooping up lots," said Ali Wolf, chief economist with Zonda. "The lot supply shortage is real, and it is causing prices to rise and builders to move further into the suburbs."​

Soaring lumber prices add $36,000 to the cost of a new home (cnbc.com)
https://www.cnbc.com/2021/04/30/soaring ... -home.html

=====

The article goes on to criticize tariffs against importing lumber from other countries as contributing a little bit to the shortages. I happen to agree. This doesn't mean tariffs are bad, but lumber basically represents a natural resource and the US has limited timber producing area relative to its large population. So I do not see this as being like the tariffs on many other things. If the US tried to produce all the timber it used, that would put a big strain on the country's forest resources. It makes total economic sense for the US to be importing timber from Canada, or Russia.

However, it's also true that timber product exports from the US to other countries are dramatically down, so I would think that would mostly compensate for the effects of tariffs on imports.

I think the media is being a little bit dishonest by blaming these problems on the trade wars.

Here's another article from 6 months ago where they are trying to blame the US timber industry being hurt by the trade war.
US timber industry has been crippled by trade war and Covid-19 - Quartz (qz.com)
https://qz.com/1934494/us-timber-indust ... -covid-19/

It obviously doesn't make consistent logical sense to be blaming the trade war for reducing exports of timber, hurting American timber jobs, while simultaneously blaming the trade war for reducing imports of timber, creating shortages of timber.

If the trade war is both reducing exports and reducing imports, then obviously those two "problems" should cancel each other out, and solve the problem by themselves.

But it seems there are many people looking for any excuse to blame tariffs that get in the way of free world trade.
#15170331
Rancid wrote:
The market will bare the increase...



The market is an ecdysiast?

The Boomers are dying. I am 70, I've been here for over a quarter century, and I will stay as long as I can. But one good medical crisis for either of us, and we will have to get an apt or a condo. We have an acre, and it's a lot of work, and I just can't do it anymore as it is.

The kids coming up won't be able to afford the burbs, and they aren't all that interested in doing so.

Demand is going to nosedive, when that happens, suburban communities will crumble because they can't keep up with the things they are supposed to do as it is.

It will be dramatic, and unpleasant, sorry.
#15170334
late wrote:The market is an ecdysiast?

The Boomers are dying. I am 70, I've been here for over a quarter century, and I will stay as long as I can. But one good medical crisis for either of us, and we will have to get an apt or a condo. We have an acre, and it's a lot of work, and I just can't do it anymore as it is.

The kids coming up won't be able to afford the burbs, and they aren't all that interested in doing so.

Demand is going to nosedive, when that happens, suburban communities will crumble because they can't keep up with the things they are supposed to do as it is.

It will be dramatic, and unpleasant, sorry.


The market will continue to bare it. Rents and real estate are basically continually sucking away everyone's money. What will take a nosedive is the rest of the economy, like consumer goods and tourist, because people are pouring more and more of their money into either rent or a mortgage.

That said, yes, it will be dramatic and unpleasant.
#15170370
Well, it makes sense. When there are instabilities in demand, that makes it more difficult and industry has has to bear those costs. It is far more economically efficient when demand is constant and steady. Consumers stopped buying houses for two years and now they are trying to buy them again like normal; they are going to have to pay for that.

There is a lag time between demand and industry meeting that demand. As this story shows, it's not only construction but the materials that go into that construction, as well as preparation of the building sites.
What's happening now is perfectly normal and "healthy", from one perspective. Rising prices incentivize industry to more rapidly increase supply, provide a rationing mechanism when there is a limited supply of something, and in this case will also help to compensate the industry for the two-year lull in demand they had to suffer.

Of course, these increased home prices are probably going to transfer to American households being more financially strained and increase the homelessness rate (in some small but significant way).
#15170371
It's interesting, why do they have to keep building all these new homes?
Because the total population of the US has kept growing (mainly due to immigration).
There are many other countries in the world where most all of the people live in old homes that are already built. They have relatively stable population numbers.

Certainly when new homes are constantly having to be built, that adds to the price of all homes (including the older ones). New homes are more expensive than already built older homes, and when there is a shortage of something it drives prices up. (Lots of new homes will not start getting built until the shortage has already driven up the price of older homes beyond a certain surplus level)

If long-term population growth of the country were much lower, overall housing prices would likely be substantially lower as well.
#15170372
Puffer Fish wrote:Certainly when new homes are constantly having to be built, that adds to the price of all homes (including the older ones). New homes are more expensive than already built older homes, and when there is a shortage of something it drives prices up. (Lots of new homes will not start getting built until the shortage has already driven up the price of older homes beyond a certain surplus level)


New homes increase supply which would actually put downward pressure on home prices. The issue in the US is that there isn't enough supply in the places that people want to live. Also, new homes are not more expensive than old homes. You are also completely ignoring location, which is a huge component to price. I live in a home that was built in the 1950s, it is worth more than the new homes being built in the suburbs. Why? Location.
#15170385
Rancid wrote:New homes increase supply which would actually put downward pressure on home prices.

Well that takes a little more detailed explanation.
First, for the sake of simplicity here, let's ignore land and assume unlimited building space. That will make it easier for us to just look at the building component of it.

What it's important to understand is that new home building can help relieve some of the pressure on prices being pushed upward by limited supply of already existing homes, but it cannot prevent the prices from rising a certain amount.

Before increased demand relative to supply pushed prices up, older homes were less expensive than new homes.
That means that new homes can never push prices back down to what they were before, or would have been if it were not for the population growth.

Rancid wrote:Also, new homes are not more expensive than old homes.

In general, a new home does command a premium price over an older home, all else being equal. But that is perhaps not expressing the meaning I was trying to get at with this statement very clearly.

It's more expensive for an overall economy to build new homes than it is to use homes which already exist.

That cost gets translated over into all home buyers, both of new homes and older homes.
(Although of course a little bit more to buyers of the new homes)

Rancid wrote:You are also completely ignoring location, which is a huge component to price.

That is not the point I was trying to get at here.

Rancid wrote:The issue in the US is that there isn't enough supply in the places that people want to live.

You are correct about that, and that is part of what creates the shortage of land. Something that is a big component of housing prices. But it is not the only factor. And that is part of what I am discussing here, the cost of building.


Rancid, when you nitpick apart my statements, you completely miss the point.

Yes, some of my statements might not be completely technically accurate, but that is not a mistake on my part. If I were to try to make all of my statements completely technically accurate, they would be so long and complicated that it would just be too difficult for anyone to follow the overall point I was trying to make. Do you understand that?

I seem to have run into this problem again and again when it comes to economic discussions. I guess the concepts are just complicated.
Oftentimes it is just not practical to explain everything, and many things have to be oversimplified, even when it leads to statements that may not technically be literally true. But the way in which they may not be true has no bearing on the main subject being explained, so the reader needs to realise that it is irrelevant.

Even if the reality consists of two different things, you just can't talk about two different things at the same time, it would make it too complicated. So you need to view each one at a time, and then you can combine those two ideas later after you do that.

Notice for example that the longer my statements are, the more difficult it is and the more concentration it takes you to try to understand what they are saying. That is why I have to oftentimes oversimplify.
#15170391
Rancid wrote:
The market will continue to bare it. Rents and real estate are basically continually sucking away everyone's money. What will take a nosedive is the rest of the economy, like consumer goods and tourist, because people are pouring more and more of their money into either rent or a mortgage.

That said, yes, it will be dramatic and unpleasant.



The plain truth is that the housing market always needs new blood. But the ability to afford a home keeps a growing number of people out of the market. Over time, expect that to get worse.
#15170455
I've been considering a new avenue - building a house out of metal. There's been an underground push toward Quonset hut homes (similar to structures built in the Army) that are suited toward long-standing residences. They're steel, so they're fire-resistant and termite-resistant. They can withstand EF3 tornadoes and Cat 4 hurricanes. They are also cheaper - much cheaper with current wood prices.

Lumber prices, you'd think, would be triggering a level of ingenuity for people to get what they want within their available means.
#15170469
Goranhammer wrote:
I've been considering a new avenue - building a house out of metal. There's been an underground push toward Quonset hut homes (similar to structures built in the Army) that are suited toward long-standing residences. They're steel, so they're fire-resistant and termite-resistant. They can withstand EF3 tornadoes and Cat 4 hurricanes. They are also cheaper - much cheaper with current wood prices.

Lumber prices, you'd think, would be triggering a level of ingenuity for people to get what they want within their available means.



While the interior space is a bit awkward, that would make for a nearly bomb proof geodesic dome.
#15170481
late wrote:While the interior space is a bit awkward, that would make for a nearly bomb proof geodesic dome.


I always thought the interior space was another of its biggest selling points (for me at least). Wide open spaces, since you don't need vertical support inside (obviously similar to a reinforced arch).

I mean, you could divide it up inside if you wanted to (if it was a big enough dwelling), or you could think of it as one giant loft.

Sorry I'm sounding more like a salesman now. I've been looking into doing this for quite a while, just haven't pulled the trigger.

EDIT: As far as temperature, you can use a spray polyurethane insulator to help keep temperature fluctuations from happening in the extreme. There was a name brand I was looking at a while ago that started with G, but it slips my mind now. Think the name was some bastardization of the word "galvanize".
#15170498
Rancid is starting to piss me off.

While I brag about working on a farm and being poor and living in a trailer, he likes to brag about how much money he makes and how nice his neighborhood is.

But, I'll just point out one obvious glaring flaw in his presentation.

His mentioning of location.

An old house in a good location worth more than a new house in a bad location.

He mentioned this as if that were some sort of revelation.

I am speaking to him from across the nation.

I might like to visit his station on my next vacation, Austin, Texas is a good location.

However, the implicit context was that of is a new vs old house in the same location.

If you have a house, in the best part of Austin, that was built in 1950, you could sell it for a pretty penny.

If you knocked it down and built a new one in it's place, you could probably sell it for a prettier penny, on average (but you might not profit, and old houses do start to gain value, like fine wines).

Take 'er easy, Rancid, have a good one, I didn't mean seriously any shit talking.
#15170499
Crantag wrote:Rancid is starting to piss me off.

The pleasure is mine.

Crantag wrote: he likes to brag about how much money he makes

My sarcasm on these forums always flies over your head it seems. Get a grip. I notice you often misinterpret the points I'm making. You are often very combative with me. You have a habit of assuming a lot with me, which is usually way off base. Part of it is that you miss my sarcasm pretty much 100% of the time here.

Crantag wrote:He mentioned this as if that were some sort of revelation.

I did not, that was your knuckle headed interpretation.

Crantag wrote:f you have a house, in the best part of Austin, that was built in 1950, you could sell it for a pretty penny.

If you knocked it down and built a new one in it's place, you could probably sell it for a prettier penny, on average (but you might not profit, and old houses do start to gain value, like fine wines).

TL;DR: What I was getting at (which, I'll admit, I didn't do a good job of getting at, due to rushed posting), is that lumber costs is a drop in the bucket of all the problems with housing costs.


I agree with yours statement above. I don't believe my previous statements necessarily contradict your statement. My point was, that there is more to the price of a home than just the cost to build it (yes, I'm sure everyone pofo understands this too). The locations where people want/need to live (i.e. the cities they are packing into) is a factor in the soaring prices. After all, when people talk about home prices in general, the location factor is coupled into those numbers as well. Given that the value of old homes is so higher in some places compared to new homes in other locations is an indicator that this location component is a big factor in the cost. Given that rent in old buildings in some locations will be higher than rent in newer buildings somewhere else, is also an indicator. People are packing into specific places.

Another way to look at this is if lumber where free, we'd still have a problem with housing costs (because of all these other factors). This lumber cost stuff is a drop in the bucket of problems with housing.

Let me ask you something. Why are new houses being built? Where are most of these houses being built? New land, or in place of a previous home?

So.. lay it on me, what other shit are you going to misinterpret and berate me on? :roll: dick.

Pants-of-dog wrote:Geodesic domes are cool for people living in rural areas and have lots of money and no kids.


Image
#15170505
Puffer Fish wrote: And that is part of what I am discussing here, the cost of building.


Sure, what I'm saying in a very round about and long winded way is that the cost of building is a tiny part of the housing problem. I think the other problems are much bigger. This news on lumber just another drop in the bucket of problems. It sucks, but it's not fundamental..so whatever.... If lumber were free, we'd still be in this shitty situation with housing costs. I think the fundamental problem is that our system and culture is designed to treat shelter as an investment and not.. well shelter. COMMUNISM NOW!

Side note, I think real estate agents do not deserve 4-6% or whatever the percentage is off every home sale. That should be a fucking crime for doing fuck all nothing but just giving you access to the MLS. Also, luxury apartments (the craftsmanship in these units is usually really horrible at that) are another fucking scam designed to squeeze more undeserved money out of people. The system is setup to squeeze more and more money from people any way it can. Eventually, I think it will starve other segments of the economy.
#15170514
Rancid wrote:The pleasure is mine.


My sarcasm on these forums always flies over your head it seems. Get a grip. I notice you often misinterpret the points I'm making. You are often very combative with me. You have a habit of assuming a lot with me, which is usually way off base. Part of it is that you miss my sarcasm pretty much 100% of the time here.


I did not, that was your knuckle headed interpretation.


TL;DR: What I was getting at (which, I'll admit, I didn't do a good job of getting at, due to rushed posting), is that lumber costs is a drop in the bucket of all the problems with housing costs.


I agree with yours statement above. I don't believe my previous statements necessarily contradict your statement. My point was, that there is more to the price of a home than just the cost to build it (yes, I'm sure everyone pofo understands this too). The locations where people want/need to live (i.e. the cities they are packing into) is a factor in the soaring prices. After all, when people talk about home prices in general, the location factor is coupled into those numbers as well. Given that the value of old homes is so higher in some places compared to new homes in other locations is an indicator that this location component is a big factor in the cost. Given that rent in old buildings in some locations will be higher than rent in newer buildings somewhere else, is also an indicator. People are packing into specific places.

Another way to look at this is if lumber where free, we'd still have a problem with housing costs (because of all these other factors). This lumber cost stuff is a drop in the bucket of problems with housing.

Let me ask you something. Why are new houses being built? Where are most of these houses being built? New land, or in place of a previous home?

So.. lay it on me, what other shit are you going to misinterpret and berate me on? :roll: dick.



Image

Stiff up that lip. I was just fucking around. I tried to say that. I shouldn't take out my failures on you though. That was wrong.

You clarified pretty good. I tend to find the argument that the high lumber prices are a temporary blip persuasive, somewhat. New building activity spiking demand. But, prices are probably tending higher as a long term trend as well.

I'm just guessing, and only time will really tell.
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