Earlier in 2021, lumber prices rose dramatically, to the point where they rose 340% in the spring. Fortunately, they came down over the summer, giving the builders some breathing space.
But now Bloomberg reports that lumber prices are on the rise. Part of the reason has to do with the fact that lumber is scarce – a by-product of reduced sawmill production and increased demand. If the cost of wood continues to rise, buyers and homeowners could feel the pain.
Rising wood prices could hurt homebuyers
With the supply of existing homes available in the real estate market being limited, some buyers may turn to new construction because they cannot find a suitable home for sale. But if the cost of wood continues to rise, so will the cost of building houses. Buyers could end up paying a lot more – and end up with much higher mortgages – if this trend continues.
Earlier this year, buyers were paying an average of $ 36,000 more for new construction. Over the next few months, that number could increase if lumber prices rise. This is because the cost of many building materials has increased due to supply chain issues.
Rising lumber prices could hurt homeowners
Many people started spending more time at home during the pandemic, and some people are now learning that working remotely can become a permanent part of their lives. As a result, many homeowners are interested in renovating their living spaces to make them more comfortable. With the increase in lumber prices, this could end up being a more expensive prospect, depending on the nature of the project.
The good news is that because home values ââhave skyrocketed nationwide, many homeowners have more equity in their properties than a year or two ago. This makes it easier for those who need to finance renovations to qualify for a Home Equity Loan or Line of Credit (HELOC).
But still, no one wants to pay more than necessary for renovations. And if lumber prices continue to rise, that could be the reality for many homeowners.
When will the wood supply resume?
Bloomberg reports that supply chain bottlenecks could cause lumber prices to continue to rise until the first quarter of 2022. From there, supply chains could catch up and lumber cost could go down again.
The good news is that the winter months are less popular for home buying and new construction, as weather issues can delay home searches as well as the building process. If the aforementioned supply issues resolve by spring, homebuyers may not be feeling too much pain.
Meanwhile, homeowners looking to remodel may want to consider putting plans on hold and waiting for lumber prices to drop. Outdoor projects are usually best reserved for warmer weather anyway, so this might not be such an unreasonable route for some people considering home improvements.