New home buyers need to brace themselves for yet more price hikes, as lumber prices are on the rise again. The extra costs will likely be passed on to home buyers by homebuilders, reports say.
Lumber prices fell from record highs over the summer, but that decline seems to have been short-lived. Prices bottomed-out in August, and since then they have been steadily gaining again. Framing lumber, for instance, has seen its price grow 40%.
For now, lumber prices are still below their May peak when they hit $1,515 per 1,000 board feet. But on Tuesday, lumber futures were trading at around $735 per 1,000 feet, more than double the pre-pandemic five-year average of $356.
National Mortgage News reported that analysts believe lumber prices are set for more increases.
Lumber is a key material for new homes and remodeling projects, and high prices were blamed for some of the massive price rises in the new home market earlier this year. In May, builders said high lumber costs were adding as much as $36,000 to the cost of the median new home.
The industry was hoping to catch a break in the summer when lumber prices began to fall. However, pent-up demand for wood quickly refueled the market and is now driving a second round of price gains, experts say.
Scott Reaves, director of forecast operations at Domain Timber Advisors, told Fortune that supply shortages are also putting pressure on prices.
“We expect the demand for lumber to continue increasing through 2022 and beyond in response to demographically driven housing needs, which will bode well for not only lumber mills but forestland owners,” Reaves said.
The high price of lumber has led to greater interest among builders in alternative materials and homebuilding methods. Earlier this week, Lennar announced it would soon break ground on the U.S.’s largest community of 3D-printed homes, which use minimal lumber in their construction.
Other companies, such as the U.K. startup Biohm, have come up with alternatives such as a fiberboard that’s made almost entirely from food waste. Some builders are also reportedly seeking out more expensive alternatives to lumber so as to avoid delaying some of their housing projects.