12 ms·
Soaring lumber prices add to the cost of a new home
- antisthenes 5y agoI wonder how these prices factor into the regular inflation calculation. Even last year, when I was buying lumber from Home Depot, they cancelled parts of my order, raised the price on certain items by almost 20% and never added them back. I had to fight them for a week and it took over a month just to get a fairly modest amount of lumber delivered.
- epicureanideal 5y agoSo about 0.3% of the price of an SF Bay Area home? At least in this area, the price has a lot more to do with NIMBYism than the cost of materials.
- braunshedd 5y agoThere's essentially no new housing being built in the Bay in general, so I suppose the cost of lumber is moot.
- hippich 5y agoProblem is - lumber prices are about the same across the country. In SF Bay area and some middle of nowhere, where such lumber increase makes a significant difference.
- throwaway0a5e 5y agoLumber prices are not the same nation wide because lumber is not thaaaaat expensive to manufacture per volume/weight so shipping costs to get it from mill the mill to the end user are a larger and larger portion of cost the farther from the mills you get.
- hippich 5y agoI just compared prices of 2x4 and construction grade plywood between Lowes location in SF area and Austin area. They are pretty much the same. I agree, distance from the mill will matter, but not to a significant degree (not 3 times for sure)
- akiselev 5y agoIME big box store prices are 2-3x that of a real lumberyard for low volumes. I don't think they're reflective of the rest of the market, especially at high volumes. When you're talking an order of 100 or 1000+ board feet from a lumberyard, it's a completely different story. I've had situations where the last mile delivery fee alone was 25% of the cost, not including the cost to get it to the lumberyard in the first place.
- ComputerGuru 5y agoThat’s besides the point. Divide both numbers by 2-3x and the argument stands.
- ixacto 5y agoThis is the real problem IMO. We need more dense condos like Chicago, where the median condo price is 268k versus other large cities where it is almost double that. This is just people being taking advantage of their housing...investment/tax shelter/savings plan that is bidding the price up. Look at something like this zero red flags that I can see for $219k that is much cheaper than in most other large cities, housing doesn't have to be this expensive. https://www.redfin.com/IL/Chicago/1706-W-Huron-St-60622/unit-1N/home/40369859 https://www.redfin.com/IL/Chicago/1706-W-Huron-St-60622/unit...
- almost_usual 5y agoCondo prices have gone down in the Bay Area since COVID. The problem is everyone wants a SFH suburban lifestyle in the Peninsula, Marin, or East Bay hills. That’s a luxury and you’re going to pay a premium for it.
- epicureanideal 5y agoBut are still EXTREMELY expensive relative to most of the US, not because of materials costs.
- deleted 5y ago[deleted]
- deleted 5y ago[deleted]
- almost_usual 5y agoIf you had the money and power to solve this problem how much housing would you build in the Bay Area?
- ixacto 5y agoI'd make SF and all the large costal cities look like this https://upload.wikimedia.org/wikipedia/commons/a/a4/Hong_Kong_Harbour_Night_2019-06-11.jpg https://upload.wikimedia.org/wikipedia/commons/a/a4/Hong_Kon.... That is enough density to have a condo cost 100k instead of 500k. Sure there will be a decent amount of taxes and HOA fees, but that would turn housing into a utility rather than a government subsidy for the middle class. Also you could wire fibre to each unit and solve the internet speed problem for these NIMBYified cities.
- deleted 5y ago[deleted]
- tamaharbor 5y agoSheet of plywood last year = $8, this year = $54.
- braunshedd 5y agoIf we're using anecdata, I've seen $20 plywood sheets going for $40 which is double the normal price, but not 7x.
- omgwtfbyobbq 5y agoI think it depends on region. I've heard of $20 sheets going to $70+ in California, and I could see someone who is close to production in Oregon seeing an increase from <$10 to >$50.
- panzagl 5y agoWhere was a sheet of plywood ever $8? Even a sheet of masonite has been over $8 for years...
- mindslight 5y agoWhat are the specs on this "sheet of plywood" that was $8 any time within the past decade? Maybe some crappy OSB? Or one of those precut 2x2 panels?
- solomonb 5y ago7/16" OSB went from $8 to $55 in Los Angeles. ACX is around $75 now.
- mindslight 5y agoRough. I'm just sitting here wanting to build a new desk and some shelves, like I guess winter is a better time for projects anyway. Although I haven't actually priced plywood in my area yet, maybe the nice stuff has gone up comparatively less. (and maybe LA will finally learn how to make multistory buildings out of something besides wood?)
- andrewmcwatters 5y agoI don't know what the risk calculus is for these home developers, but I do know that in particular areas of the US, you just straight up cannot afford a home anymore on median income (or even the top 20%ers looking for fair pricing!). I anticipate that mortgages will continue to push past 30 years into a strange 45-year+ territory, and we'll begin to see Japan-like multi-generational mortgages. Actually, in reality this is already happening, because people buying homes past the age of 37 (think retirement at 67, but these people are still working and trying to figure out estate handling late in the game) are passing on their mortgage to their children. I am personally seeing this with my friends. No headroom for paid off inheritances! Alternatively, if the federal government does not prevent it from happening, residential REITs will buy them all up and force people to rent.
- Workaccount2 5y agoThe financial/economic forest is way overgrown and no one wants to be the one to set it on fire.
- andrewmcwatters 5y agoI agree. Politicians have weak incentive to push back I assume? If you do, you put average people at REITs out of work. This isn't a terrible thing if you ask me, because not much of it is real estate specific. REIT HR people can find work at other companies, developers and salespeople, too. But it's not a good look, I suppose? Real estate is a real problem that no one seems to want to touch. "The rent is too d*mn high!"
- tryptophan 5y agoREITs are not the problem. Land speculation is the problem. Worst part is that the gov promotes this, and voters eat that shit up as well("Your mortgage is an investment"). https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax is the solution.
- toomuchtodo 5y ago
- colinchartier 5y ago> Lumber tariffs had prices already rising a year ago, but then when the pandemic hit, production shut down. The expectation was that housing demand would dry up for a long time. But instead, after a brief pause, it came roaring back. How can this be the case when lumber prices are surging in Canada as well? You'd expect that if the price was in response to tariffs then the origin country would be flooded with supply?
- vkou 5y agoMarginally profitable mills shut down/go bankrupt when tariffs are introduced, and unlike AWS instances cannot be spun up on demand.
- kokanator 5y agoDoes it feel like we have squeezed a critical part of our infrastructure here allowing it to go bankrupt? This could have lasting affects for decades.
- vkou 5y agoCanadian lumber has always been a political football for American politicians to kick around whenever they needed to score some points, so we're used to this sort of thing. Like any resource extraction industry, it goes boom, it goes bust, it recovers.
- cma 5y agoThey don't necessarily melt down the machines and recast them as ingots in a bankruptcy.
- throwaway0a5e 5y agoThe big bottleneck is mill capacity (as evidenced by the fact that timber prices have not increased much). Unexpected high demand is driving most of the rest of it. Both of those affect Canada as well. Tariffs are only a small part of the overall cost increase.
- BitwiseFool 5y agoThe universe is determined to keep as many millennials from buying homes as it can.
- paulpauper 5y agomillennial home ownership rates is only slightly below boomers when matched for age
- aazaa 5y agoWhere do you get that, because this article says otherwise: > Millennials are less likely to be homeowners than baby boomers and Gen Xers. The homeownership rate among millennials ages 25 to 34 is 8 percentage points lower than baby boomers and 8.4 percentage points lower than Gen Xers in the same age group. https://www.urban.org/sites/default/files/publication/98729/millennial_homeownership_0.pdf https://www.urban.org/sites/default/files/publication/98729/...
- aschearer 5y agoNot according to this article: https://www.washingtonpost.com/business/2020/01/20/millennials-share-us-housing-market-small-shrinking/ https://www.washingtonpost.com/business/2020/01/20/millennia... "When baby boomers hit a median age of 35 in 1990, they owned nearly one-third of American real estate by value. In 2019, the millennial generation, with a median age of 31, owned just 4 percent... that gap will probably narrow by the time they see 35. But they’re not likely to reach 30 percent of the housing market — or even the 20 percent attained by the smaller Generation X at the same point in their lives."
- Morvan 5y ago>The universe That's a funny way to spell government appointed central bankers who fix the price of money.
- qeternity 5y agoYou cannot blame CBs. I despise the current monetary policy as much as the next person but this is a function of society. We have stopped believing in “no pain no gain”. We think that everyone should be gifted a painless utopian existence in which nothing bad ever happens. Darwinian forces always win.
- skit 5y agoWhat's even crazier is that the builders are identifying that even with the increased price for lumber, demand is still there—people are willing to eat the cost. I don't imagine builders will be decreasing their prices after there being plenty of lumber supply.
- nfRfqX5n 5y agoit's likely still cheaper than buying into the overpriced housing market right now
- throwawayboise 5y agoUnless they are colluding that's not how a free market works. If supply is truly plentiful, someone will be willing cut prices to gain sales. Others will then have to follow or watch their customers disappear.
- Leherenn 5y agoDoesn't that assume that you can scale relatively quickly? Otherwise the effect can stay marginal.
- bluGill 5y agoYou can though. Most of the labor is in skills that are easy to teach. You can take your half your seconds and promote to foremen, the other half as seconds under the old seconds. The foremen get the old third line as seconds, and you hire all new third-line people. There are a few people who aren't worthy of, or don't want that promotion, but overall the limit is how fast you can convince inexperienced people to work for you. This process can repeat yearly. You can also work more overtime - money talks to a lot of young people. You do take a small productivity hit, so it isn't all smooth. Still there is plenty of opportunity to expand to meet demand.
- jonfw 5y agoWith residential construction, most of the jobs are being contracted and subcontracted out, so promoting new foreman, etc. isn't even overhead the builder worries about. They just get new crews bidding on jobs out of nowhere
- throwaway5752 5y agoI wouldn't buy a house now if I could help it. It only seems reasonable because of extremely low rates. That is also the same thing driving equity valuations in our field to historically unusual levels. This is partially driven by market and partially driven by monetary policy, and it really can't go much lower than it is. Rate increases have a large increase on the present value of a mortgage of stock.
- almost_usual 5y agoI didn’t bet on this, have excess funds and pulled the trigger last month and closed on a home where I want to be. I don’t think I’d care if the price dropped 50% tomorrow, I’m where I want to be in the long run and my rate is a near record low.
- throwaway5752 5y agoBuy a house because you want one, and because you like the specific house. Just not because it's an investment or FOMO. If you pay $100,000 more than you would at a 100 higher basis points, but you live in it 20 years you will certainly build back equity and hedge yourself against rents to make up the difference. There are places where home prices are just getting back to where they were in 2006, though. You can certainly end up underwater on a mortgage and stuck. Property taxes, insurance, and maintenance are high fixed costs with a home.
- ttul 5y agoGen-X: "We've got all this extra cash because we couldn't fly anywhere or go on cruises. Let's build our dream home in the mountains." Boomer: "Well, the 401-K is up a ton. Can't seem to spend the cash pouring out. Let's upgrade the house and buy a second home somewhere nice." Millenial: "We still have no savings because rent is insane and incomes have not kept up with inflation for decades as capital has played a larger role in growth than labour. We continue to have no long term security from a pension. I guess we'll just keep slaving away..."
- WanderPanda 5y agoBitcoin enters the game.
- smabie 5y agoWhile not representative, I would imagine that for most millennial HN users, 2020 was their best year in terms of financial gain: roaring stock market, wfh and CoL savings, insane crypto boom, record level bonuses, etc. I do understand that it isn't a representative picture, but among my friends, none of us have ever done so well financially in our entire lives.
- x3sphere 5y agoIt's been a K shaped recovery. Certainly a lot of people have benefitted and did even better than past years despite the pandemic, but for a lot of others they haven't. Been great for me as well but outside of people in tech, I don't know too many in crypto as they didn't have the funds to risk in the first place. Nor do they have much stock exposure outside of their 401k.
- aazaa 5y ago> Some builders have said they are slowing production in the face of exorbitant costs, but single-family housing starts were up 41% in March year over year, according to the U.S. Census. Builders are clearly trying to ramp up production as fast as they can to meet soaring demand. For the next several months we'll be in a period of base effects. That means that year over year comparisons are going to look alarming. Think back to what was happening one year ago. The economy almost completely shut down. Return to "normal" is going to give a lot of weird readings. Articles like this should point this out, but don't. They should note, for example, the % drop in single-family housing starts YoY for 2020 for comparison. The article hints at the phenomenon, but fails to actually quantify it. This leads to a more sensationalistic article that might attract eyeballs, but does a poor job of informing.
- throwaway1777 5y agoYou’re not wrong about housing starts, but as far as the lumber prices goes it’s not a base effect. The price was already increasing pre-covid and covid shutdowns accelerated the trend.
- omgwtfbyobbq 5y agoFrom what I've heard, this is mostly a function of... 1) Lumber mills shutting down because of weak demand and tariffs. https://www.woodworkingnetwork.com/news/woodworking-industry-news/two-new-canadian-lumber-mills-shut-down-hundreds-more-laid https://www.woodworkingnetwork.com/news/woodworking-industry... 2) Curtailment of remaining production because of coronavirus https://www.woodworkingnetwork.com/news/canadian-news/coronavirus-forces-curtailments-three-major-canadian-lumber-mills https://www.woodworkingnetwork.com/news/canadian-news/corona... 3) The housing market going a little nutty https://www.vox.com/22264268/covid-19-housing-insecurity-housing-prices-mortgage-rates-pandemic-zoning-supply-demand https://www.vox.com/22264268/covid-19-housing-insecurity-hou... 4) I imagine record low interest rates also contributed
- xiphias2 5y agoSo basically people in the US voted for higher prices, so that they can keep their job that can't compete on international markets, and they got what they voted for.
- ortusdux 5y agoAlso: - WFH people fleeing high COL cities, buying fixer-uppers, and paying whatever to renovate - Rolling covid shut-downs of companies that make wood products like OSB glue or treated wood chemicals - Freight costs - Trailing effects from a bad fire season and the Texas ice storm repairs - Tariff repercussions - Russia is planning to stop exporting raw logs next year. They are about 12% of the worlds supply. - Speculators profiting off the volatility
- jdhn 5y ago>- Russia is planning to stop exporting raw logs next year. They are about 12% of the worlds supply. Why would they do this? Is this a way of getting back at the US for sanctions? Seems like they're shooting themselves in the foot.
- dragonwriter 5y ago> Why would they do this? Raw logs are an input; it drives up the price for external industries dependent on lumber and drives them down for domestic industries, sacrificing raw material exports for more competitive intermediate and finished goods exports. Since for the most part economic development depends on having exports as far toward the finished goods end of the raw material to finished goods spectrum, its not an insane strategy if you can deal with the short-term dislocations. Shifting competitive advantage is harder than leaning in to your existing competitive advantage, but sometimes your existing competitive advantage is a long-term loser.
- adrr 5y agoHas anyone looked at the cost of food or gas lately? Interest rates need to go up. It is beyond stupid that I was able to refinance my house at 1.75% on 15 year loan in December. My previous loan was 4% on a 30 which already was extremely low. It’s giving people free money who don’t need it. Side effect is the inflation that punishes the poor even more.
- garettmd 5y agoThis. I've seen several sectors where prices are going up, and everyone always points to narrow causes particular to that sector for prices going up. But everyone seems to ignore the fact that when you add trillions of dollars to the economy one of the most understood results is that it increases inflation.
- notsureaboutpg 5y agoI'm convinced inflation is down the pipeline. What can I do to come out okay on the other end? Invest in stocks? Genuinely asking
- WanderPanda 5y agoI think it is not yet obvious if it will hit the poor or the middle class the most.
- programmertote 5y agoAnecdotally agree 100% with this. I notice that the grocery prices for food that I typically purchase have either risen noticeably (by as much as 12% for certain Asian food items) and/or are suffering from shrinkflation (e.g., when I make breakfast for me and my wife, I was not able to fit four bread slices on an IKEA plate that I use at home; but starting a couple of weeks ago, the bread slices--same brand and still paid the same price of $1.50/bag--now fit perfectly on the IKEA plate and this is not just because of the abnormally small batch of bread. I have bought bread two weeks in a row to know for sure that the sizes have shrunk).
- lightelement 5y agoDoes inflation punish the poor more? It punishes people with savings, and people with savings are generally not poor. Inflation also helps anyone with a loan (because that loan just got "smaller"), and people with a lot of debt are generally poor as well.
- teoruiz 5y agoHonest question: why are houses in the US primarily built with wood? Is it just because it’s cheaper? Even if it’s cheaper, is it worth to have a cheaper but obviously less durable building when compared to brick and mortar? It’s always been baffling for my southern European mind.
- diydsp 5y agoFor my gf (in the usa), it's aesthetics. Though I look at brick and think "longevity." Perhaps historically it was cheaper/easier to use local wood and that image stuck with people?
- ImprovedSilence 5y agoNothing is built with brick anymore. If you see a newer than 1940s brick house, its a stick frame (wood) with a layer of brick outside it for aesthetics. Also people associate brick with longevity, but as several of my friends in old ass brick row homes, their foundations are crumbling, and are usually in need of serious structural repair. Brick isnt bomb proof like people think it is. Its even more susceptible to long term stress from wind shear.
- cigaser 5y agoRelic from boom after WW2, many houses needed to be build fast.
- kps 5y agoA wood frame is much better in earthquakes; it just happily flexes. Steel is an alternative but until the plague was more expensive than wood.
- QuadmasterXLII 5y agoAt least in my area, brick houses are actually less durable because they crack on our shifty soils
- rsanheim 5y agoIt goes up much quicker and requires less highly skilled tradesman to build and to maintain. There are new developments in the states where they produce the frames for the various housing 'templates' off-site, and then ship it to the plots and build the house there, almost like a lego kit.
- dcolkitt 5y agoA lot more builders should be looking into steel framing. Light gauge steel has also gone up, but nowhere near as much as lumber. For the typical project, it's probably cheaper now than wood framing. Especially when you take into account that steel framing can be pre-cut at a factory with CAD software, requiring much less skilled labor onsite. And steel makes a much better frame. Fire resistant, termite free, mold free, holds up better in earthquakes and floods, stronger, doesn't rot, doesn't warp. The problem with the construction industry takes way too long to adapt new patterns, even long after shifting technology and economics makes it compelling.
- kaydub 5y agoA lot of wood framing is being done at factory and then assembled on site.
- idiotsecant 5y agoSteel framing also has a tiny fraction of the r-value of wood. It might seem like the framing element is irrelevant but it adds up quickly. A layer of R-19 batt insulation is 63% less restive to heat transfer (effectively R-7.1) when installed in an assembly of 2x6 metal studs on 16" centers, compared with R16 in the same assembly in wood.
- tgb 5y agoI see this in new construction in my area and have wondered about having a electrically conductive frame. Any danger there? Also how do you mount anything if you don't have wood studs?
- WDCDev 5y agoMy family moved into our newly built home in the northern suburbs of Pittsburgh in Oct. of last year. We were part of the first group of buyers in a relatively new plan of higher-end homes. Since Oct. of last year, the base price of our model has gone up $215,000 and every lot in this phase (phase 1) has now sold. I suspect at least half of that increase is materials, and the rest is due to market demand. The market is just crazy and in talking to my builder he has said supply shortages could last through EOY and into next.
- ineedasername 5y agoAs the article notes, much lumber production shut down believing COVID would significantly impact demand, but that was really not the case except for a very short period of time. In my area in particular, I live outside of a city hit hard by COVID, and that had lots of workers who could transition to WFH. The combination means that city dwellers have flocked to the local suburbs in massive quantities, often buying up the cheapest houses & either immediately expanding them or simply knocking them down completely to rebuild from scratch. As a result, not only is it difficult to find local contractors available for even minor home improvements, local property values have spiked as much as 30% over the last 14 months. This has been greatly assisted by mortgage interest rates that as incredibly low-- I just refinanced and saved about 20%/month on my mortgage and an overall $50,000 saving over the life of the loan.
- jukabo 5y agoINFLATION