(WSYM) — The real estate market is red hot, but record-high lumber prices are driving up costs for home builders and home buyers.
Michael Stoskopf, the CEO of the Home Builders Association of Southeastern Michigan, said the cost of lumber, which was 35 cents-a-foot for per thousand board feet at the start of the pandemic, has skyrocketed since.
"On the exchanges right now, it’s closing upwards of $1,400 per thousand board feet, that’s a factor of four," he said. "So, if a house had $10,000 worth of just a framing lumber package in it, that same lumber package now would cost $40,000."
Brad Upton of Dillman & Upton in Rochester, sells lumber to custom builders and re-modelers.
"It’s just strictly they’re charging what they can charge because we want it," he said. “I don’t know if there’s an end in sight until we increase the supply or drop the demand, it’s a true commodity. The pricing has been absolutely off the charts.”
The spike in lumber costs impacts the pool of new home buyers, too.
I met Darian Neubecker with Robertson Homes at their new Brewster Village ranch-style condominium development in Rochester Hills.
“We’ve got that demand, we’ve got a growing pool of millennial buyers and unfortunately at the same time you get the demand, now you’re running into the supply chain and cost issues," Neubecker said.
That is pricing thousands of potential home buyers right out of the market.
"So when you’re talking about increases of four times that, pretty quickly a $40,000 increase is going to take a huge, over 60,000 households, no longer qualify for that level of house," Neubecker added.
According to Stoskopf, Michigan’s 20 home builder associations are joining with 700 other groups just like them across the country to urge Congressional oversight of lumber manufacturers and mills because of the industry’s growing frustration with the supply chain issues. In the meantime, retailers like Upton have no choice but to pay.
“Manufacturers are working really hard at these prices to increase the supply because they’re making a lot of money, and we have to pay any price because the last thing we want to do is tell a builder we don’t have the material for you," Upton said.
"I think demand is going to be up for a long period of time, but at some point, price points will hurt demand and I think that will allow the supply chain to catch up," Neubecker added. "I can understand the frustration of home buyers right now. They’re ready to buy, they’re ready to grow their households and where do I go, where do I find something that’s affordable?”