Rising lumber prices have contributed significantly to the increase in home prices, according to a new Bank of America (BAC) Global Research Report.
The report analyzed recent data on the housing market. Its key findings included record-tight supply and low affordability, the overheating of the housing market as a whole, and high construction costs.
Among these high construction costs is the price of lumber. Lumber prices have spiked in 2021, driving up housing prices even higher. “Given the rapid rise in lumber prices,” the report says, “the total cost of lumber and manufactured lumber products for an average single family home has soared 184% from April 2020 to April 2021, rising to $48,316.”
[Read more: How record-high lumber prices are making new homes less affordable]
The report found that the spike in lumber and related materials has added over $34K to the price of a new home over the past year. “The sharp gains in builder costs are starting to hold back production,” it stated. With lower production, sales inevitably have begun to decrease and prices have continued to rise.
Pending home sales also dropped substantially in April. The National Association of Realtors’ (NAR) Pending Home Sales Index, fell 4.4% from the previous month.
[Read more: Why buying a house will cost even more than you think]
Pent-up demand which accumulated over the course of the pandemic disrupted the housing market in 2021 as restrictions were lifted and people began to look for new homes.
“Demand for housing climbed higher in the months following the onset of the pandemic, leaving existing home sales to reach a peak of 6.7 million saar in October, the highest since 2006,” the report explains. “This has left builders to scramble to respond, sending building permits to a high of 1.9 million saar in January. The result: home prices and building costs have surged higher.”
Ihsaan Fanusie is a writer at Yahoo Finance. Follow him on Twitter @IFanusie.
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