As the famous New York Yankee Yogi Berra once said, “It’s like déjà vu all over again.” While my tenure as NAHB chairman may be new, the problems we are facing as an industry—including skyrocketing lumber prices—are all too familiar.
In 2018, high lumber prices overtook the cost and availability of labor as the top economic challenge for builders. In 2020, amid economic disruptions from the COVID-19 pandemic, lumber again has soared to record highs, driving up housing costs and potentially slowing new construction and a housing-fueled economic rebound.
Average lumber prices have surged more than 170% since mid-April, reaching a record high over $800 per thousand board feet. Oriented strand board prices have nearly tripled over the past year. NAHB economists estimate that these recent price spikes have boosted typical new single-family home prices by over $16,000, and the cost of a typical apartment by more than $6,000.
According to NAHB’s standard priced-out calculations, that increase in new-home prices has priced more than 2.1 million U.S. households out of the market for a median-priced new home, meaning that these households qualified for a mortgage before the current run-up in lumber prices, but not afterward.
Finding tangible ways to address our nation’s housing affordability crisis is one of NAHB’s highest priorities. Families across the economic spectrum need housing that meets their needs at a price they can afford. That need for suitable, affordable shelter is now more important than ever.
Addressing rising lumber prices that are driving up the cost of new homes is key. In August, NAHB sent a letter asking President Donald Trump to take prompt action on policies and initiatives to increase the supply and reduce the cost of lumber because soaring lumber prices and supply shortages are harming the industry and the overall economy.
NAHB urged the White House to play a constructive role in alleviating the growing problem by calling on domestic lumber producers to ramp up production that had been paused during stay-at-home orders at the onset of the pandemic. We also pressed the president to work with Canada on a new softwood lumber agreement that would end tariffs averaging more than 20% on Canadian lumber shipments into the U.S., an important step forward given that the U.S. imports roughly one-third of its lumber from Canada.
NAHB also sent letters to Commerce Secretary Wilbur Ross and U.S. Trade Representative Robert Lighthizer, calling on them to work with Canada to develop a long-term solution to a trade dispute that has continued for nearly 40 years. And we reached out to Zoltan van Heyningen, executive director of the U.S. Lumber Coalition, to explore strategies to address the shortages in the supply chain and ease market concerns for builders and consumers alike.
As the nation fights to rebound from the effects of the COVID-19 pandemic, housing has been a bright spot for the U.S. economy, particularly single-family construction, with permits running 3.4% higher during the first half of 2020 compared with the first half of 2019.
The most recent NAHB/Wells Fargo Housing Market Index, which measures builder confidence in the market for newly built single-family homes, surged on gains in buyer traffic and stands at its highest reading in its 35-year history. The measurement is a strong indicator that a robust increase in single-family construction is required to meet solid, consistent demand for housing.
Residential construction can lead the nation out of its current economic downturn, as it has during virtually every major economic disruption over the past five decades. But it is vital that elected officials support policies that help America’s home builders gain access to reasonably priced building materials, particularly lumber.
