Why New-Home Prices Are Now at Least $24K Higher Than Last Year
February 23, 2021
Lumber prices have recently hit record highs, pressing on builders’ budgets and increasing the cost to build a new home and to create accessories such as decks and fences. Buyers and remodelers are feeling the price increases.
The average price of a new single-family home has increased $24,386 since April 17, 2020, the National Association of Home Builders reports. The increase is due to a more than 180% jump in lumber prices since last spring.
The multifamily sector is feeling the increase in costs too. The average new multifamily home has risen by $8,998 since last April, the NAHB reports.
Builders are passing along some of the added lumber costs to buyers, but they’re finding they can chip away at affordability so much in raising their prices too quickly. The higher costs are also impacting their profitability and margins.
The NAHB calculated the average costs based on standard estimates of softwood lumber used to build the average home. The costs include structural framing, flooring, ceiling finishing, cabinets, doors, windows, roofing, siding, and exterior features like garages, porches, decks, railings, fences, and landscape walls.
The lumber prices come at a time when the new-home market is seeing escalating demand as buyers are in search of greater housing inventory. In January, the pace of building permits, a gauge of future construction, was at the highest rate since 2006, the Commerce Department reported last week. Broken out, single-family new-home permits in January were 28% higher than a year ago.
Renovation contractors and do-it-yourselfers are also feeling the added costs from skyrocketing lumber prices.
Rick Matus, senior vice president at Case Architects & Remodelers, told CNBC that they used to review the cost of materials on a quarterly basis but now the volatility in pricing has prompted them to reassess every 30 days.
“We are seeing some lumber products jumping as much as 25% in a month’s time,” Matus told CNBC. “One of the very popular asks from us is can we build a screen porch addition or deck. Compared to two summers ago, a screened porch project, we are probably 15% or 20% more expensive.”
“Record-High Lumber Prices Add $24K to the Price of a New Home,” National Association of Home Builders’ Eye on Housing blog (Feb. 22, 2021) and “Thinking of a New Wooden Deck for Spring? It May Bust Your Budget,” CNBC (Feb. 10, 2021)
Updated: May 10, 2021