Homebuilders Fear Lumber Will Slow Starts & Economy

Originally published by: BloombergFebruary 12, 2021

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The biggest U.S. homebuilders group urged the Biden administration to help increase lumber supply, saying record-high costs threaten to price potential home buyers out of the market and curb construction.

The administration needs to remove import tariffs on Canadian lumber and urge producers to boost output, the National Association of Home Builders said Friday on its website. In November, the U.S. Department of Commerce reduced its duties on Canadian softwood lumber by more than half to 9%.

The association’s request comes as U.S. lumber prices soar to levels never seen before, stoking concern that inflation is spreading more broadly across the economy at a time when food costs are also rising and millions remain out of work due to the coronavirus pandemic. Inflation expectations for the next 12 months are at the highest level in six years, according to the University of Michigan.

Graph showing price increase for softwood lumber

“NAHB is urging President Biden and Congress to help mitigate this growing threat to housing and the economy by urging domestic lumber producers to ramp up production to ease growing shortages and to make it a priority to end tariffs on Canadian lumber shipments into the U.S. that are exacerbating unprecedented price volatility in the lumber market,” said NAHB Chairman Chuck Fowke on the association’s website.

Lumber prices have more than doubled from the middle of last year, disregarding what is typically a seasonal slow period during the North American winter. Low interest rates and pandemic-inspired home renovations and building have caused an unexpected surge in demand for building materials.

The number of single-family houses being built in the U.S. soared last year, and by December reached the highest since 2006. This strong demand took the industry by surprise and lumber producers have not yet replenished inventories, causing prices to surge and builders to scramble to find enough product for their immediate needs.

“The increase in lumber prices is forcing our company to delay construction starts, which will only exacerbate the lack of supply in our market,” said NAHB First Vice Chairman Jerry Konter, who is also a home builder and developer in Savannah, Georgia.

Alicia Huey, a high-end custom home builder in Alabama and second vice-chair of NAHB, said the price of her lumber framing package on identically-sized homes has more than doubled over the past year to $71,000 from $35,000.

Earlier this week, NAHB said the U.S. median home price in the fourth quarter of 2020 rose to $320,000 versus $313,000 in the prior quarter, raising affordability concerns.