Lumber prices in North America are rising as the U.S. housing market recovers, Chinese demand continues, and Canada’s export of lumber is constrained due to a beetle infestation, reports Bloomberg Businessweek. In March, sales of new single-family properties jumped 1.5 percent, and housing starts rose to a 1.04 million annual rate, the fastest since 2008. According to the National Association of Builders, a 2,400-square-foot home in the U.S. typically requires about 14,400 board feet of softwood lumber.
The mills that slowed production as a result of the housing bubble are now starting to ramp up, but builders are challenged by the rising cost of materials. Construction companies are paying more for lumber and other materials used heavily in residential building. For example, the Toll Brothers Inc., the biggest U.S. luxury-home builder, paid approximately $3,000 more per home in material and labor costs in its fiscal first quarter ended January 13, with lumber comprising two-thirds of that additional expenditure.
Gerry Van Leeuwen, vice president at consultant International Wood Markets Group in Vancouver, said that “for the first time ever, we have a recovery in North American housing alongside a very robust China market, and Canada cannot go back to peak production any time soon.” The combination of these factors are causing prices to go up around the world.
According to Finance & Commerce, the cost of certain building materials went up by double digits in the past year. Gypsum products jumped 14 percent, lumber and plywood 10.8 percent, and architectural coatings including paint 10.1 percent. Passing off the higher material costs to buyers is easier to do in places where demand for new construction is high but tougher in regions where inventory of existing homes can meet consumer needs. With the current trend of rising home prices, however, builders are better able to handle the higher costs. Shawn Nelson, president of New Spaces, based in Burnsville, Minn., noted that builders will be “able to sell their homes at price points that make sense for them now.”