Timber prices could push homebuyers out of the Louisville market
The plan was simple, as Natashia Taylor recounts. They would sell the house, move into an apartment for the next 12 months, and use that time to build a house big enough for the whole family.
“That’s why we signed the lease for a year -” OK, at least we’ll have time, like nine months, to be able to find something and build. We’ll be ready to go in a year, “Taylor said.” Absolutely not. The prices are outrageous. This is kind of where we are. We’re in the middle, stalled in a sense. ”
Taylor recently signed another six-month lease at Avoca Apartments in east Louisville, a year after moving in, and she’s not the only one with a story. Rising prices for lumber and other building materials have pushed many potential buyers out of the local market, experts say, and have also increased costs for builders.
Buying a house will almost always be expensive. But a relatively small price increase can have a big impact on the market – every time the median price of a new home in Louisville increases by $ 1,000, according to a National Association of Home Builders study, 833 County Families from Jefferson can no longer afford to buy it.
“There is a real impact with the rising cost of materials,” said Juva Barber, executive vice president of the Building Industry Association of Greater Louisville. “This has had an impact on many first-time homebuyers. It impacts a lot of people who wanted to take it to the next level. discovered that the house of their dreams costs a little more because of the price of materials.
“It just causes a lot of caution in the market and it costs people.”
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Lumber is in the headlines, and for good reason. Nasdaq market records show that its price hit $ 1,670 per thousand board feet, a peak reached in early May after steadily rising in the first four months of the year.
That number had fallen to $ 774 on Monday – a significant drop, noted Key Homes owner Billy Doelker, but not as much as you might think. Sure, that’s almost $ 900 cheaper than it was less than two months ago, but that price is still $ 74 higher than it was in early January, and almost two. times higher than it was at the end of June 2019, when the number was around $ 394.
“Ultimately, the price right now is still pretty high,” Doelker said Monday morning. “We’re starting to see a trend in the right direction, but it’s not declining as fast as it has increased.”
The massive price increase is linked, as you will probably guess, to COVID-19.
First, Doelker and Barber said, sawmills around the world have reduced their workforce and production to encourage social distancing and counter an expected drop in demand amid the pandemic. But between a boom in the national housing market, which faces historically low inventories, and an increase in the number of homeowners renovating their homes in the working-from-home era, the need for lumber has not been met. faded away. Prices hit $ 810 last summer before soaring in 2021.
Other factors also played a role. Doelker cited a shortage of workers in recent months as a contributing factor to the rate hike, along with tariffs on Canadian lumber (President Donald Trump imposed a 20% tariff in 2017, and well that this number was reduced to 9% last December, the administration of President Joe Biden is pushing to bring it to 18%). Shipping costs have also increased, he added, along with the price of other important building materials, including windows, vinyl, roofing, and OSB (engineered wood used in roofs). and other parts of the house).
“Business hasn’t slowed down during this time,” said Doelker, NAHB board member and past president of the Kentucky Home Builders Association. “The interest has always been there. I think that kept some people from going forward, but the fact that the interest rates are still low… it was affordable to borrow the extra money. to cover additional costs. “
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The drop in lumber prices from four digits to three in June was an encouraging start. But it will probably be some time before you notice a difference at Home Depot.
Barber said her association had learned that lumber prices are expected to continue to decline in the second half of the year, although she does not believe they will fall to pre-pandemic levels. The price of other materials, however, will keep the process of building a house an expensive undertaking. The OSB, for example, was trading at $ 1,527 per thousand board feet in June, according to Bloomberg.
“It’s not just lumber, and what people think of as two-by-fours. It’s OSB,” she said. “OSB is still very expensive, and that obviously has an impact on the cost of a house.”
There is always a delay before consumers see a price change at the retail level after a noticeable rise or fall in the market, Doelker said. He doesn’t expect your local hardware store costs to change significantly until the fourth quarter of the year at the earliest.
“The cost per board foot, which has definitely started to go down over the last couple of months,” he said. “But we haven’t really seen a dramatic impact at the point of purchase yet, either at Lowe’s or at one of the lumber distributors.”
And while prices remain high, Barber said, so does demand.
“What’s amazing is that even with all of these increases the market is still very hot and there are still people buying,” she said. “As soon as we see houses (for sale), people buy, because there is nowhere to go. Now.”