While lumber prices have recovered from the record high levels of May 2021, volatility in prices remains a key concern among builders. In its analysis of the most recent Producer Price Index released by the U.S. Bureau of Labor Statistics, the NAHB estimated lumber price volatility was at an all-time high for a 12-month period.
Amid concerns over volatility and continued supply chain disruptions, the NAHB submitted a letter to President Biden urging the White House to take action. The letter called for action to redouble efforts to address lumber price volatility, to address supply chain bottlenecks for lumber and other building materials, and to return to the negotiating table with Canada and develop a new softwood lumber agreement. The NAHB submitted a similar letter to the White House in January amid a period of historic lumber price escalation that negatively impacted housing affordability. As recently as July, the NAHB estimated rising material costs directly added nearly $30,000 to the average price of a new single-family home.
While lumber prices have recovered, the NAHB said cash prices for lumber have increased more than 27% over the last month and “news of mill curtailments are stoking fears of another massive price spike this fall, and next spring.” The association also highlighted how supply chain issues are causing delays and keeping home prices about 20% higher than a year ago. Ali Wolf, chief economist at Zonda, said the supply-side challenges are holding the market back from reaching its full potential.
“The buyer demand pool is robust, but builders are finding themselves in a difficult place where the cost of building a home is substantially more expensive than before the pandemic and forecasting the price of inputs going forward is nearly impossible,” Wolf said.
Wolf said Zonda data shows that 70% of builders are intentionally slowing their sales to better match their inventory with production capacity.
Lumber price volatility and supply chain disruptions are major concerns on the supply side, with the National Lumber and Building Material Dealers Association (NLBMDA) also submitting a letter to the White House. The association called on the White House to address ongoing labor shortages, which the NLBMDA believes pose “a very real risk to the long-term health of the lumber and building material dealer industry and its supply chain.”
“NLBMDA urges [the] administration to examine free-market solutions and eliminate any unnecessary rules and regulations that are hindering the lumber supply chain and labor market,” the association wrote in its letter to President Biden.
The NAHB stated lumber price volatility and supply chain disruptions and bottlenecks likely will be compounded should the U.S. be unable to reach a new softwood lumber agreement with Canada.
“The impending November decision from the Commerce Department concluding its administrative review of tariffs on softwood lumber imports from Canada will do nothing but exacerbate these issues,” the NAHB wrote in its letter. “Projections are that these tariffs could double again, which is extremely troubling given constraints experienced in the lumber supply chain coupled with the extremely high lumber prices we have experienced this year.”
Echoing the NAHB’s concerns about housing affordability, the NLBMDA said tariffs on lumber imports are “a tax on American consumers” that will further aggravate the affordable housing crisis. The NLBMDA specifically called for the Department of Commerce to reverse its preliminary determination to increase countervailing duties and antidumping duties on Canadian softwood lumber imports from 9% to 18%, expressing concerns about how the duties would impact both dealers and American consumers.
The NLBMDA, which met with the Department of Commerce Secretary Gina Raimondo in June, requested a second meeting with the secretary to specifically discuss the impact of lumber price volatility on lumber and building material dealers.
“Time is the true fix, as the port congestion clears and building material availability becomes easier,” Wolf said. “Until then, support for companies in the thick of the supply chain are imperative. Recruitment efforts at factories, ports, and for trucking companies can help alleviate some of the pressure, but investment in factories and curbing the spread of COVID-19 are also needed.”
