Many people bought new homes during the pandemic due to low interest rates, the ability to telecommute, and needing a space to do the work. Lumber became more and more expensive. The National Association of Homebuilders (NAHB) found that that price of an average home has increased by over $24,000! Zonda, a housing data platform, found that at least 70% of builders are raising prices intentionally. Why?
- interruption of raw materials when lumber mills shut down at the start of the pandemic due to safety reasons. When reopened, the prices went up 200%!
- raising prices will slow the demand while also capping the number of sales to bring orders and production more in line with each other.
- delivery times are slower.
- home offers are coming in over asking price.
Lumber costs are one of many commodities on the rise. Commercial roofing prices are also rising. The mandated shutdown created market disruption which impacted steel and metal production and this trickled down to roofing all the way to automotive industries.
The winter storms and cold temperatures that hit Texas and Louisiana caused the chemical production plants to not be operational for some time leading to time delays and supply interruptions.
On top of the weather some of the raw materials are sourced from overseas and the shipping industry has been impacted by delays at ports due to short staffing, container availability and drivers.
The pandemic, weather and market conditions have tripled the value of lumber and caused other raw materials to also rise. The spending habits of the American people went from eating out to buying toilet paper and treadmills. Consumer goods as well as raw materials are all going to rise. Just like the real estate market. This is a global issue. At some point the market will be saturated and the prices will decrease. Until then, your wallet will take the hit.
Elisha Heebner is the Assistant Director of Rental Services and property manager of Del Val Realty and Property Management. Elisha specializes in property management as many homeowners today need a competent, caring person to handle these affairs for them. Professionally, it is her duty to provide services to her clients with integrity, competence, and confidentiality.