Surging lumber prices add significant costs to new home construction

New home sales continue to surge, across the country. In March, the Commerce Department reported activity increased more than 20%. The cost of buying a home is going way up, as well, as demand and the lingering effects of the pandemic are leaving an expensive shortage of supplies.

In Houston's Acres Homes neighborhood, builder Johnny Hollins is happy to get construction started on a development that will include more than 60 new homes. Unfortunately, Hollins' hope that he could offer 'affordable' housing is no longer the case. 

"We're not going to be able to build 'affordable', on this project, because of the rising cost of lumber and labor shortages," says Hollins.

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Those rising costs are no small matter. As new homes are being built to meet demand, the pandemic disrupted the supply for lumber and other construction materials, and no one has been able to catch up. 

As a result, the JG Hollins homes that were going to sell for between $275,000 - $290,000, are now priced between $300,000 and $350,000. 

"To frame these homes, the lumber package has gone up 180%," laments Hollins. "With those prices going up, of course we have to increase our prices to the consumer."

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In Washington, the National Association of Home Builders says it's the same problem across the country, as the price tag for the average family home has gone up $24,000. The group warns the supply-shortage could ripple through the economy.

"Demand isn't really the issue, here, it's the cost that's the problem and the ability of builders to live up to their contracts," says NAHB CEO Jerry Howard.

For now, Johnny Hollins says he's got the supplies to build what he's planned. He's just disappointed that the customers who can afford to buy his homes, may not be who he hoped to help. 

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"We're gonna cut some people out," he says, "A lot of the first-time home buyers are not going to be able to purchase, because of the price point at which we're selling."