Neighborhood Inscope

Lumber shortage adding fuel to the home prices fire

By Dr Denver H. Bubble

Tue Mar 06 2018

The biggest driver of the increase in home prices post-The Great Financial Crisis is the shortage homes. Builders, while trying to maintain healthy profit margins, have been constructed new homes at furious pace are facing some challenging market conditions. One of these conditions, a growing lumber shortage, is being caused by wildfires and a trade disputes between the US and Canada which has reduced supplies. The supply shortage has gotten so bad that according to the National Association of Home Builders material prices now rival labor shortages as builders' biggest concern.

The price of lumber began its steep climb last year due to forest fires destroying land around the Pacific Northwest west. This destruction of prime forest combined with an Obama Administration era trade dispute over softwood lumber. The trade dispute like the fire forest hit both US and Canada. Lastly, the Trump Adminstriaon enacted tariffs on most types of lumbers, with the highest being 24%. Lumber yards are also trying to stockpile ahead of the busy spring building season. The number of new units under construction in the US was up 10% according to the Commerce Department. Moving in step permits for new homes also roses. From the Zerohedge article, "Marc Towne of Classic Homes, which builds midrange to high-end houses in Colorado Springs, Colo., said he is spending $8,500 more on lumber for a typical home than a year ago, an increase of almost 40%. The company’s passing on about half the cost to buyers for now while it waits to see if lumber prices fall". Given the recent trade tensions from steel and aluminum, it doesn't look like any easement on the lumber tariff enacted, buyers in the Denver area are looking at higher prices for new home being purchase due to the lumber shortages