Is it a Good Time to Build a House? Or Renovate?
What you need to know if you’re considering a construction project.
Finally, the lumber bubble has popped! Between April 2020 and May 2021, the price per thousand board feet soared from $349 to $1,514 – more than a 400% increase! In July the price dropped to $642. Some analysts predict that by the end of August, the price will dip even further, nearing pre-pandemic rates of $350. Does this mean it’s a good time to build a house or renovate? Maybe.
Some of the reasons behind lumber’s price swings
The steep climb in lumber prices wasn’t due to a shortage of trees; it was due to a crunch at sawmills.
Early in the pandemic, many mills shut down for health and safety reasons. With millions of people staying at home, the nation’s lumber retailers experienced higher than normal demand as people remodeled, built new features like decks and treehouses, and even built new homes.
Now that many folks are vaccinated and getting back to work and travel, demand has cooled off. However, prices as of this writing are still 183% higher than April 2020. Part of the reason the prices remain high is because of the labor difficulties sawmills are experiencing.
How the pricing affects new homebuyers
With lumber prices roughly double those of April 2020, the National Association of Home Builders (NAHB) reports prices of single-family homes has increased by $30,000 and the cost of a multifamily home has gone up $10,000 on average.
Financing an additional $30,000 at 3.5% for 30 years will add $135 to a monthly home loan payment. If this is within your budget, building a new home or making major renovations, then now could be the right move for you.
Consider other items in short supply
Lumber isn’t the only commodity affected by pandemic market disruptions. Windows, appliances, and furniture are all backlogged. A tightly squeezed supply chain has been affected by everything from a limited labor force, a shortage of computer chips and international shipping delays. This means those building or renovating their homes could potentially face months-long wait times to complete a home project.
While Consumers can’t change supply chains, we can certainly help finance your home building and renovation projects! Rates on construction loans and HELOCs remain historically low, while purchasing new windows or appliances with a personal loan can cost less than using a credit card.
Consumers helps more than 2,000 members finance land, first and second homes, and home improvement projects each year. We’d love to help you with a mortgage or home equity line of credit; contact us online or call us at 800-991-2221.