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WHY ARE CONSTRUCTION COST SO HIGH!


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The cost of a common commodity has scrambled summer plans, and it’s not gas: Soaring lumber prices are making new homes, renovations and even simple picnic tables drastically more expensive.

At times, bills are coming in thousands or even hundreds of thousands of dollars over estimate. In the most extreme cases, projects have come to a screeching halt as prices spiral out of control.


In early May, lumber futures peaked, up more than 300% from a year earlier. Prices have since come down somewhat, but they’re still up more than 200% compared with this time last year.

The inflated prices may last awhile. “I don’t think that you’re going to see this level out for probably 12 to 18 months,” said Tony Uphoff, chief executive of Thomas, a sourcing platform that connects companies with industrial suppliers.


Part of the problem is that the U.S. relies on lumber from Canadian forests — a supply that has shrunk in recent years, Uphoff said. In 2017, the Trump administration imposed a 24% tax on softwood lumber imported from Canada, and in response, several Canadian mills shut down. “That actually was the initial step that created some of the problems we’re still seeing in the supply chain today,” Uphoff said.

Despite the constraints, construction of new homes is still on the rise this year, reflective of hot housing demand that developers say they are rushing to meet.


According to the National Assn. of Home Builders, rising lumber costs are adding nearly $36,000 to the cost of an average newly built house and some developers are getting creative at passing that along.

When buying a newly built home, buyers before the pandemic typically signed up for a waiting list and then paid a set price for a builder to construct the house on a vacant lot in a new-home community. But an April survey from the trade group found a majority of builders now have “escalation” contracts that allow them — if construction costs rise — to increase the sales price after a buyer makes a down payment.

Doug Bauer, chief executive of national home builder Tri Pointe Homes, said that despite the price increases, he isn’t seeing buyer fatigue and noted that his company could sell homes faster.


RESOURCES: https://www.latimes.com

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