Material Costs May Be Hindering the Housing Market

February 19, 2021

Demand for single-family homes is has reached a fever pitch, and builders are finding it harder to keep up. One of the major hurdles for homebuilders is the skyrocketing cost of materials.

The costs for lumber reached an all-time high recently, inching above $1,000 per 1000 board feet. The record high of $1,004.90 is double the price from just three months ago. Several changes, such as favorable weather conditions allowing logging to continue through the winter and a reduction of tariffs on Canadian lumber being shipped to America, were expected to relieve some of the pricing pressure, but demand has kept prices elevated.

The increased costs have some builders putting projects on hold. Housing starts for single-family homes in January were down 12% from December. Strong demand, low mortgage rates, and now a diminishing supply of new homes will continue to push prices higher, but some analysts worry that prices are rising too high too fast, and there may be a correction as buyers are priced out.

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