Today I’m talking about lumber prices, supply and demand, and what you should expect in the homes you’re selling and buying. Recently there was a great article in Deseret News about what’s happened with lumber prices, OSB prices, and studs. As you’ll see in the graph in the aforementioned link, there has been such a huge change not just around those materials, but also in building materials, which have dramatically increased in price.
Here’s a word of caution with new construction: You are selling your home at a premium, but often new construction prices adjust drastically per the supply and demand. If prices get to a point where builders are so nervous that they’re not going to build and if buyers are priced out of the market due to the new construction prices, it’ll cause a demand issue. Then there will be extra supply and then we’d see a price adjustment.
Right now, we have a housing issue despite summertime being one of the strongest seasons where people are building. It’s fair to say that the low inventory issue is going to continue at this rate for a while. In the colder seasons in North America, there tends to not be as much construction due to the climate. I think the demand for materials will change as we see the temperatures drop. What you may also start seeing is people finding creative solutions around these prices. We’ve seen builders using reclaimed wood as well as bamboo because it’s cheaper but just as durable.
As you’re evaluating a new construction property or renovation, keep those factors in mind. If a builder tells you it’s going to be a fixed cost, they’re going to leave a gap in that pricing, not knowing what the market’s doing. They don’t have a crystal ball either, but if it’s cost-plus, whatever that cost is, they’re going to add their amount to it. Just know what you’re looking for and know what you’re asking for.
If you have any questions or are looking at renovations or new construction projects and pricing, let us know. We can get you the data so that you can evaluate it and make the best-informed decision.