In the comprehensive article, The Price of Lumber is 193%—and about to spike even higher, Lance Lambert, an expert finance and real estate reporter, shows the current state of lumber prices in the United States.
The prices are escalating and not likely to come down any time soon. This phenomenon isn’t happening in isolation; it’s come with a ripple effect on the United States real estate market. According to Random Lengths, lumber prices per a thousand board feet are up at $1,048. Compared to April 2020, this is an all-time high rising to 193%.
Because of this, there’s been a surge in home prices all over the states. According to the National Association of Home Builders, a typical example is single-family homes that are now selling have increased by $24,000.
Though it’s not certain when the price will come down, Samuel Burman, a commodities analyst from Capital Economics Ltd, believes the prices should fall by half. “Even though we expect lumber demand to hold up well for some time, we still think that a rebound in supply will lead to a sharp fall in the price of U.S. lumber over the next eighteen months,” Burman added.
What’s the reason behind the rising prices of lumber? You’re probably wondering. Let’s take a deep dive into the current state of affairs and understand what’s causing the rise. We’ll also project what this means to the real estate market and investors.
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Why the Rise in Lumber Prices
A couple of factors come into play when it comes to the surging prices of lumber. The obvious ones include the COVID-19 pandemic, labor shortage, and the beetle plague. Let’s take a quick look at how they contribute to the problem.
1. The COVID-19 Pandemic
Covid-19 has been around for some time now. Apart from the health effects, the pandemic has affected the economy in severe ways. A typical one has been in the closure of mills. Consequently, there’s been a surge in demand for lumber for DIY, home renovations, and home construction since last summer. Unfortunately, this demand couldn’t be met because of the low supply of lumber.
An increase in demand has seen lumber prices rising through winter until now, when they’re at an all-time 12-months high. Sadly, homebuilders waited in vain for lumber prices to fall. The spring-summer building season is looming again, causing a further rise in lumber prices because of the rush to get lumber boards.
2. The Beetle Plague
In his detailed article, The US Wood Shortage Can be traced to a decades-old Beetle Infestation in Canada, Samanth Subramanian points to the beetle infestation as one of the causes of the rise of lumber price.
Climate change has contributed to a high degree of beetle infestation of the forests in British Columbia. Since this happened, lumber production has been affected, leading to a decline in supply to the United States.
How Real Estate Investors Can Benefit from the Rise in Lumber Prices
Notably, rising lumber prices have led to an increase in home prices. According to the National Association of Home Builders, single-family homes have increased by $24,000. This is quite costly for the average person.
Besides, homebuilding is quite an expensive venture because of the high cost of building materials. Let’s face it! You need more money to buy a home or materials to construct your own. The economy is suffering, and this may be a tough call. We get it!
That’s why we’ve got a bespoke lending program designed for investors like you. Feel free to contact us for further assistance.