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Today’s Ridiculous Price of Lumber

Because I’m in the real estate business, the price of lumber can seriously affect my business. Home builders, deck builders, and remodeling companies all use lumber as a key resource to their business. The coronavirus pandemic has caused lumber prices to skyrocket and because of this, the average price of a new construction home in Kansas City has jumped from $339,000 just one year ago, to $409,000 today. That’s a 17% increase in the average cost of a new home and almost all of that price increase is due to the rising price of lumber.

Lumber prices seem to set a new record almost daily, now up 67% this year alone and up 340% from a year ago, according to Random Lengths, a wood products industry tracking firm. And lumber doesn’t just go into framing a house. Those added costs hit cabinets, doors, windows and flooring.

Lumber prices are skyrocketing for various reasons beyond just high demand from homebuilders and remodelers. Lumber tariffs had prices already rising a year ago, but when the pandemic hit, production shut down at the lumber mills. The expectation was that housing demand would dry up for a long time. But instead, after a brief pause, it came roaring back. Homebuilders were caught off guard, as were lumber producers.

But it’s not just lumber. Prices of gypsum, which is drywall, are up nearly 7% from a year ago. Steel mill product prices are at a record high, up nearly 18% in March year over year. It’s used for beams, sheet metal products and wiring. The price of copper also set a record high this month and is up 27% year to date.

And then there is land. The price per single lot is up 11% this year compared last year, because demand is so high and supply is low. New lot supply is down 20% from a year ago in the Kansas City area and homebuilders are scooping up new lots as fast as they can to keep up with future demand.

The new housing market is underperforming its full potential, and will continue to as long as the lot shortage persists. Add higher commodity prices to that equation and the new home market will continue to struggle at a time when it should be reaping huge rewards from hungry buyers.

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