The National Association of Home Builders (NAHB) published an analysis today of how volatile lumber prices have significantly impacted home prices and rent. Since the pandemic lockdowns began in 2020, softwood lumber prices have added $14,345 to the price of a new single-family home and $5,511 to the market value of an average new multifamily home, NAHB said.
The analysis shows that the estimates include framing lumber, plywood, oriented OSB, particleboard, fiberboard, shakes and shingles—in short, any of the products sold by U.S. sawmills and tracked on a weekly basis by Random Lengths. Estimates developed from the Builder Practices Survey conducted by Home Innovation Research Labs show that the average new single-family home uses more than 2,200 square feet of softwood plywood, and more than 6,800 of OSB, in addition to roughly 15,000 board feet of framing lumber.
Builders do not in general buy lumber and other building products directly from sawmills, but from an intermediary like a lumber yard. For that reason, NAHB estimates mark up sawmill prices by gross margin as a percent of sales for the “lumber and other construction materials” industry, as reported in the U.S. Census Bureau’s Annual Wholesale Trade Tables,
Softwood lumber is also an input into certain manufactured products used in residential construction—especially cabinets, windows, doors and trusses. To account for the manufacturer’s margin, sawmill prices for the lumber embodied in these products are marked up by the percent difference between receipts and cost of goods in the “wood product manufacturing” industry, as reported in the IRS Returns of Active Corporations tables.
Taking all this into account, at the prices reported by Random Lengths on April 17, 2020, the total cost to a builder for softwood lumber was $16,927 for the products in an average single-family home, and $5,940 for the products in an average multifamily home.
More recently, based on Random Lengths prices reported on July 01, 2022, the costs have risen to $29,407 for the softwood lumber products in an average single-family, and $10,734 for the products in an average multifamily, home. These numbers represent a 74 percent ($12,480) and 81 percent ($4,795) increase in single-family and multifamily builders’ softwood lumber costs, respectively.
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