Lack of wooden is affecting reasonably priced housing in Indiana
INDIANAPOLIS – First toilet paper, then microchips, now sawn timber.
After an unexpected surge in demand as people started remodeling projects and building new homes, the wooden yards faced a shortage of one of the largest components to any construction.
According to a national report by the National Association of Home Builders (NAHB), lumber prices were volatile after the COVID-19 pandemic due to increased demand and supply side restrictions. Across Germany, lumber prices have risen by more than 300% since April 2020.
National Association of Home Builders
While there is a shortage of lumber, the Indiana Builders Association said that the logs are there, mills simply are unable to keep up with demand.
Shortly before the pandemic began, the timber factories fired their employees for home assignments and social distancing measures, and cut production. However, when people started remodeling and buying new homes, they couldn’t keep up with the demand.
“Everyone expected the economy to cool down, and we had the opposite,” said Schwinghammer. “The demand is high. As the months went on and on and on and on, they couldn’t get the lumbar spine produced fast enough to meet that demand. “
Since supply could not meet demand, prices began to rise.
By now, many people who visit community flea market pages on Facebook may have seen light-hearted posts offering a deal in a sheet of plywood for a new vehicle. Schwinghammer reports that this material, which is mainly used for floors, siding and roofs, has more than quadrupled in price.
“You can go to Lowes, you can go to Home Depot, you can go to any timber dealer and buy materials, you will just pay a lot more for it,” Schwinghammer said.
An eight foot length of 2 × 4 that would have sold for $ 2 around this time last year now costs people nearly $ 8. A 4 × 8 sheet of plywood that would have sold for $ 10 is now between $ 45 and $ 60.
“When you have that and you have the prices for every piece of wood that goes through the roof, it makes housing unaffordable,” Schwinghammer said. “At the Indiana Builders Association, our primary goal is to make housing safe and affordable for Hoosiers. And we can’t do that when prices are at this level. “
NAHB data shows that almost one in five contractors says they had to delay construction or sales when costs rose. Other builders include clauses in contracts if prices continue to rise.
One organization that is feeling the effects of skyrocketing timber costs is Greater Indy Habitat for Humanity. The non-profit organization buys raw materials at market prices and often does not receive any donated wood. While they had plans to double production of homes this year, high prices are preventing them from doing so.
“This convergence of expenses and materials is increasing to such a degree and the demand for what we do is meeting at a time that we have never seen before,” said Jim Morris, president and CEO of Greater Indy Habitat for Humanity.
The high cost of wood can usually be passed on to the consumer through mortgages or rent. The NAHB said the price hike increased the market value of an average new apartment building by nearly $ 13,000, which resulted in households paying $ 119 more a month to rent an apartment.
However, for organizations like Habitat for Humanity, they are a working, low-to-middle-income family, so they may not necessarily be able to pass the costs on all the time.
“We still have to find ways to keep this affordable. So we have to go a lot and hopefully raise more money, but that’s not an immediate answer or solution,” said Morris. “We are concerned that we do not have to build as many houses as we would like to meet the demand of those who come to our program.”
While prices have soared over the past year, there is still hope that prices will stabilize. Doug McCoy, the director of the Center for Real Estate Studies at IU Kelley School of Business, says the problem takes a lot of factors into account and it will take time to resolve.
“Will it resolve itself next year? No. In the next 2-3 we’ll see a lot of improvement and hopefully in the next 3-5 we’ll go back to a more normal situation and the market will adjust, “said McCoy.
Even if it stabilizes over the next few months, Schwinghammer says we will feel the effects in the next year as well.
“If we have no sales today, the next month and the following month, we will have no construction jobs and construction projects in 2022,” said Schwinghammer.
McCoy says there are many issues that go into the timber price problem and it will take time to correct.
The NAHB is working with the Biden administration to solve the problem of lumber prices and delivery bottlenecks. During a home remedies subcommittee hearing on May 6, Rep. Ben Cline (R-Va.) Quoted the NAHB data and asked Secretary of Commerce Gina Raimondo what resources are available to study the problem and its economic impact.
“Many supply chains were disrupted during the pandemic. It’s not just wood. Recently ITA [the International Trade Administration] brought a lot of stakeholders together to find out why this is happening, ”Raimondo replied to Cline’s question. “
For those considering building a new home, McCoy said they should be careful to avoid doing something they might regret later.
“It may be better to be patient now than I think it is than to get scared and do something that you are really uncomfortable with,” said McCoy.
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