Lumber Prices Plummet – But Other Building Costs Soar
The all-time high cost of $1,700 for a thousand board feet has dropped to $500, but steel products are up 10.8% and gypsum (for drywall) is up almost 16% this year.
NEW YORK – Doug Yearley, CEO of the luxury home builder Toll Brothers, told CNBC that a recent drop in lumber prices promped some significant savings on home building costs – but homebuyers shouldn’t expect to see those savings. While lumber prices are falling, other material costs are surging.
Lumber prices reached a record high of more than $1,700 per thousand board feet in May. But on Wednesday, it averaged about $500. Yearley says that translates to about a $40,000 savings in building a home.
But steel mill product prices increased 10.8% in July following a 6.2% increase in June, the National Association of Home Builders reports. It blames tariffs on steel imports for adding to building costs. Also, prices for gypsum products, which are used for drywall, rose 2.5% in July and are up nearly 16% in 2021. Copper has also been in short supply.
“The tailwind of lumber coming down is very comforting,” Yearley told CNBC’s Jim Cramer. “It’s going to help us. It’s going to drive some margin. But I think it’s going to offset some of the other cost increases that we’re feeling.”
Yearley says it’s also taking longer to build homes with recent supply chain and labor issues. “It took about two weeks longer in our third quarter to deliver a home,” Yearley says. “We expect that to continue for a couple more quarters as we manage through it.”
The median sales price of a new home in July was $390,500, an 18.4% increase compared to a year earlier, the Commerce Department reported this week.
“New residential construction remains strong, but building material pricing and availability are likely to remain significant headwinds,” Charlie Dougherty, an economist at Wells Fargo, told NBC News earlier this month.
Source: “Toll Brothers CEO Says the Drop in ‘Crazy High’ Lumber Prices Will Save $40,000 Per Home,” CNBC (Aug. 25, 2021)
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