How Rising Lumber Costs Are Affecting the New Home Industry
August 27, 2020
When Covid-19 hit the U.S. earlier this year, the nation held a collective breath in anticipation of how the pandemic would affect business, education, employment, and family life. While at Mungo Homes, we continued with production and new home starts, what we -- nor anyone else in the new home construction industry -- anticipated was that as people spent more and more time working and schooling from home, the dissatisfaction with their current living situation increased and finally boiled over for many.
This boiling point, together with a surge in first time homebuyers and low interest rates, led to record demand and sales for new homes in May, followed by another record-breaking month in June for Mungo Homes, sustained sales in July and similarly on track in August. While pushing to keep up with production in response to dwindling available market homes and a record number of build jobs, what’s been happening behind the scenes is much more challenging. According to the National Association of Home Builders, framing lumber has seen a 130% increase in cost since mid-April causing the average new single-family home to increase by more than $16,000.
According to the National Association of Home Builders (NAHB), "Lumber producers both in the U.S. and Canada...curtailed operations to a great extent in March and early April, both because there were lockdown orders and they forecasted that plunge in demand."
The quick rebound and high demand for housing was unforeseen and, now, lumber supplies in the U.S. are facing a big shortage, presenting issues for the housing and construction market as lumber prices increase rapidly … sometimes daily.
In response to rising lumber costs, Mungo Homes has made incremental increases in the base prices of new homes over the last several months. However, the small increases are no longer adequate to cover the rising costs. Unlike the limitations of much of our competition, our purchasing power will allow us to continue working closely with lumber suppliers to anticipate additional costs through the end of the year, and to prevent any interruption in production.