Savings from lower lumber prices could help consumers, but experts say the U.S. needs more government action to help boost supply and keep prices low.
Lumber is essential to home production in the U.S. According to the National Association of Home Builders, nine out of 10 new single-family homes built in the U.S. are wood-framed.
The U.S. depends on lumber imports from Canada. During the Covid pandemic, sawmills slowed production in anticipation of lower demand.
However, according to the NAHB, when demand skyrocketed, sawmills weren’t able to ramp up to meet this demand.
Experts say the U.S. needs to build about 2 million homes to meet demand, but there isn’t enough lumber available.
According to Moody’s Analytics, the U.S. is currently short more than 1.5 million homes.
This shortage has caused home sales and rental prices to exceed affordability for many consumers.
NAHB Chief Economist Robert Dietz said lumber for a typical single-family home is ranging between $30,000 to $40,000, and about $10,000 per apartment unit, USA Today reported.
Experts say lumber prices spiked in response to supply chain issues, labor shortages, and high demand.
The Biden administration also doubled the tariffs last year on Canadian lumber imports.
Lumber prices hit a peak of $1,733 per thousand board feet at around this time last year, and still were above $1,000 just a few months ago, according to Statista.
Now, the Chicago Mercantile Exchange is showing current trading figures at around $650 per thousand board feet.
To compare, the 2020 high was $400 per board foot.
Many experts think President Biden needs to take action to improve the housing supply. He recently announced an action plan for affordable housing.
But while experts caution that consumers shouldn’t expect pre-pandemic prices for home improvement projects this summer, they say many are likely to benefit from the lower lumber prices as previous stock is reduced.
As more and more buyers have been priced out of the market, many have turned to home improvement projects to spruce up their current dwellings and improve the value for a future sale.
Many have also taken advantage of high home equity to cash-out refinance and use the funds for these types of projects.
Experts say the following types of projects may add the most value to a home:
- Kitchen renovations
- Upgraded, energy-efficient appliances
- Upgraded bathrooms
- Opening up floor plan
- Finished basement or attic
- New roofing or siding
- New or upgraded deck
- Fresh coats of paint inside and out
Projects that don’t add value include luxury additions or swimming pools. Experts say to check comparable homes in the area to determine which projects make the most sense.
Photo by Ono Kosuki