While prices for resale homes are being driven up due to both lack of inventory as well as demand, prices for new homes will no doubt continue to rise due to prices that must be paid for goods used in residential construction. Excluding energy, goods prices rose 2.1% in January (not seasonally adjusted) and have increased 6.8% over the past 12 months, according to the latest Producer Price Index (PPI) report released by the Bureau of Labor Statistics.

According to EyeOnHousing’s David Logan, the index for inputs to residential construction, including food and energy, also increased over the month (+2.5%) as energy prices climbed 5.1%. “Prices paid for softwood lumber (seasonally adjusted) rose 13.9%. Lumber prices have remained extremely volatile since the 88.5% increase between April and September 2020. Since falling 22.9% between September and November, softwood lumber prices have risen 28.7%.”

He also reports that the lumber PPI is now just 0.8% lower than the record high set in September and —barring a record decline in softwood lumber prices over the next two weeks—the index will increase further in February as prices have continued to climb in the weeks after the January survey data were gathered.

There have been nominal price movements and tariffs on Canadian lumber, but cross-border purchasers are affected by the strength of the U.S. dollar relative to the Canadian dollar, with the USD weakening 12.8% since March and falling 3.6% since lumber prices began rising again in November.

CNBC’s Diana Olick reports that while consumers want more newly built, affordable homes, builders are finding that hard to deliver, especially as prices for framing lumber spike ever higher. “Lumber prices inched above $1,000 per 1,000 board feet before falling back below that milestone. The high of double the price from just three months ago and a record.

Source: NAHB, CNBC, TBWS

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