Skyrocketing costs for lumber and other building materials are jeopardizing affordability in the new-home market, builders say. Lumber prices have jumped more than 300% since April 2020. Prices for other materials, such as steel, concrete, and gypsum, are climbing at a record pace, too.
Rising material prices “are significantly driving up prices for single-family homes and apartments,” Robert Dietz, chief economist at the National Association of Home Builders, notes in the group’s Eye on the Economy newsletter. “Combined with expectations of rising interest rates, these higher prices place additional pressure on housing affordability, which continued to decline in the first quarter.”
Steel mill products have seen prices jump nearly 56% year-to-date, and gypsum products used for drywall, for example, have risen 12.5% over the past year.
The escalating costs of lumber and its impact on new-home construction have dominated real estate headlines over the past year. The rising costs have added nearly $36,000 to the average price of a new home and $13,000 more to a multifamily unit. Some builders are even adding escalation clauses to their contracts to protect their bottom line, though that adds an extra financial burden to buyers.
The NAHB has been urging lawmakers to look for solutions to resolve surging lumber prices, supply shortages, and tariffs. Last week, four bipartisan lawmakers addressed the need to seek solutions to rising lumber prices, such as by boosting production or ending tariffs on Canadian lumber imports into the U.S. “The reality is that record-high lumber prices are putting the American dream of homeownership out of reach for hundreds of thousands of potential home buyers and disproportionately harming middle- and low-income families across the country,” Sen. Jerry Moran (R-Kan.) said on the Senate floor last week. “At a time when residential home building is booming, it is essential that home builders and consumers have access to the materials they need at competitive prices.”