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Rising cost of lumber and steel adds thousands to cost of new homes

by | Aug 14, 2018 | Uncategorized

The cost of a new home is on the rise as lumber prices increase in the face of strong demand and new tariffs. Steel prices are also a concern as new tariffs take effect.

The Trump Administration imposed a 20% tariff on Canadian lumber in January. Canada has long been the largest supplier to the U.S. softwood lumber market, accounting for around 28% percent of annual U.S. sales in the past decade. Along with wildfire season and other “supply-chain issues,” according to CBS’s MoneyWatch, this has caused lumber prices to rise by double digits since last year.

The National Association of Home Builders (NAHB) expects that the rise in lumber costs could add $3000 to the price of an average home, and possibly as much as $9,000 or more.

“We’ve raised our prices anywhere from $10,000 to $12,000, depending on the house. I’ve been explaining to [customers] that’s the impact of it,” NAHB Chairperson Randy Noel told MoneyWatch. Noel’s company builds homes in Louisiana.

Lumber is used for framing and roofs. MoneyWatch explains that the alternative to lumber is steel—another product facing tariffs. In June, the Trump Administration imposed a 25% tariff on steel imported from Mexico, Canada, and the European Union.

While alternative products can be used to replace steel—which is used in the concrete flooring and foundations of most single family homes, according to Realtor.com—they are generally more expensive and fewer construction workers are trained in how to handle them.

A labor shortage is also hampering the home building industry, which has been racing to catch up to demand. Many construction workers left the industry during the Recession and haven’t returned. Immigration policies are also impacting the number of available workers.

One result of all the upheaval is that builders are struggling to accurately price homes. Often, builders quote prices before the home is constructed. “When the price for lumber spikes suddenly, builders have to eat the cost on those projects—and raise their prices for the next batch of customers,” notes MoneyWatch.

 

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