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Despite Price Drop, US Construction Costs Remain High, Impacting Home Affordability
Posted on August 22, 2024 |
Even though lumber prices have significantly decreased from their historic highs in 2021, construction costs in the United States still remain quite high, posing challenges for home affordability and the broader US housing market.
Unusual price increases for timber in 2021 May took it to a record $1,711 per thousand board feet. Disruptions to the supply chain, a rise in housing demand, and other pandemic-related factors combined to cause this spike. The average cost of timber has significantly decreased from then to $524.50 per thousand board feet now in 2024, although it is still quite high than it was before the pandemic.
The effects of these costs are particularly felt by people who work in the construction sector. According to the National Association of Home Builders (NAHB), around 15,000 board feet of framing timber and over 2,200 square feet of softwood plywood are needed to build a typical single-family home. The costs of these essential building components have a direct impact on the total cost of constructing a new home.
The general manager of Doug Ashy Building Materials, Mr John Breaux, has seen upfront the notable price swings in the global timber industry. He said that in all of his years in the business, he had never seen difficulties like those that arose at the height of the price increase. Breaux stated that even with the cost reduction, OSB sheets, which were selling for about $45 a sheet during the peak of the price hike, were now only about $12 per sheet. He did, however, note that, in light of historical norms, the present prices continue to be comparatively expensive even with this drop.
The NAHB emphasizes that variations in softwood lumber prices have a direct and profound impact on the price of constructing new homes. When combined with other economic factors—such as rising interest rates, increased labour costs, and inflation—the high cost of lumber continues to play a significant role in the ongoing challenge of housing affordability in the US. Potential homebuyers face higher costs, making it more difficult for many to enter the housing market, which in turn has broader implications for the economy as a whole.
The current situation stresses the complexity of the housing market, where even a reduction in material costs does not necessarily translate to increased affordability. As the construction industry handles these challenges, stakeholders continue to advocate for solutions that could help mitigate costs and improve access to affordable housing.
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