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Soaring lumber prices add to the cost of a new home

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Re: Soaring lumber prices add to the cost of a new home

#51

Post by andrewmcwatters »

forrestthewoods wrote: post #38
andrewmcwatters wrote: post #4

I don't know what the risk calculus is for these home developers, but I do know that in particular areas of the US, you just straight up cannot afford a home anymore on median income (or even the top 20%ers looking for fair pricing!). I anticipate that mortgages will continue to push past 30 years into a strange 45-year+ territory, and we'll begin to see Japan-like multi-generational mortgages. Actually, in reality t…

> but I do know that in particular areas of the US, you just straight up cannot afford a home anymore on median income Correct. The national median income is insufficient to purchase a home in the most expensive cities in the country. That seems reasonable? The national median household income is about $65,000. That’s enough to afford a mortgage of somewhere in the $300,000 to $350,000 range. Is that enough for San F…

People have different definitions of "affordable." To me, a gross $65,000 household income, less after taxes, is not enough to be able to afford a home within that price range. It's probably closer to below $275,000.

I do agree with you regarding location, though.

Re: Soaring lumber prices add to the cost of a new home

#52

Post by notsureaboutpg »

adrr wrote: post #30

Has anyone looked at the cost of food or gas lately? Interest rates need to go up. It is beyond stupid that I was able to refinance my house at 1.75% on 15 year loan in December. My previous loan was 4% on a 30 which already was extremely low. It’s giving people free money who don’t need it. Side effect is the inflation that punishes the poor even more.

I'm convinced inflation is down the pipeline. What can I do to come out okay on the other end? Invest in stocks? Genuinely asking

Re: Soaring lumber prices add to the cost of a new home

#53

Post by WanderPanda »

adrr wrote: post #30

Has anyone looked at the cost of food or gas lately? Interest rates need to go up. It is beyond stupid that I was able to refinance my house at 1.75% on 15 year loan in December. My previous loan was 4% on a 30 which already was extremely low. It’s giving people free money who don’t need it. Side effect is the inflation that punishes the poor even more.

I think it is not yet obvious if it will hit the poor or the middle class the most.

Re: Soaring lumber prices add to the cost of a new home

#55

Post by bluGill »

skit wrote: post #8

What's even crazier is that the builders are identifying that even with the increased price for lumber, demand is still there—people are willing to eat the cost. I don't imagine builders will be decreasing their prices after there being plenty of lumber supply.

It doesn't take much to start a construction company. Most of them have foremen who are perfectly able to quitting and starting their own company. Both the new and existing company will hire a few new people (zero experience needed, start today at $18/hr - or some wage that gets people in) and so there are more in construction overall.

As such builders will try, but once lumber prices go down a bit they will probably lower prices to attract customers. Plumbers and the like might get a little more many as they are harder to train up, but for the most parts there is enough competition that passing savings on to customers is going to happen.

Re: Soaring lumber prices add to the cost of a new home

#56

Post by throwaway5752 »

almost_usual wrote: post #33
throwaway5752 wrote: post #13

I wouldn't buy a house now if I could help it. It only seems reasonable because of extremely low rates. That is also the same thing driving equity valuations in our field to historically unusual levels. This is partially driven by market and partially driven by monetary policy, and it really can't go much lower than it is. Rate increases have a large increase on the present value of a mortgage of stock.

I didn’t bet on this, have excess funds and pulled the trigger last month and closed on a home where I want to be. I don’t think I’d care if the price dropped 50% tomorrow, I’m where I want to be in the long run and my rate is a near record low.

Buy a house because you want one, and because you like the specific house. Just not because it's an investment or FOMO. If you pay $100,000 more than you would at a 100 higher basis points, but you live in it 20 years you will certainly build back equity and hedge yourself against rents to make up the difference.

There are places where home prices are just getting back to where they were in 2006, though. You can certainly end up underwater on a mortgage and stuck. Property taxes, insurance, and maintenance are high fixed costs with a home.

Re: Soaring lumber prices add to the cost of a new home

#57

Post by sokoloff »

pbronez wrote: post #37
ericmay wrote: post #21

Earlier quoted context omitted.

> The federal government wouldn't really be able to prevent REITs from buying up homes. Why wouldn't it? If this was bad enough the government could just pass limitations on it. Hell, the government could probably ban REITs overnight if that was wildly popular.

If you want to support individual home ownership against well-capitalized REITs, I think you basically need local governments to impose some kind of vacancy tax and/or an non-owner-occupancy tax. Otherwise individuals will never have the financial firepower to keep up.

If that's your goal, you should also support the mortgage interest deduction (to put owner-occupied borrowing on the same footing as commercial borrowing) and the deductibility of state/local real estate taxes on your federal return (for the same reason).

Re: Soaring lumber prices add to the cost of a new home

#58

Post by programmertote »

adrr wrote: post #30

Has anyone looked at the cost of food or gas lately? Interest rates need to go up. It is beyond stupid that I was able to refinance my house at 1.75% on 15 year loan in December. My previous loan was 4% on a 30 which already was extremely low. It’s giving people free money who don’t need it. Side effect is the inflation that punishes the poor even more.

Anecdotally agree 100% with this. I notice that the grocery prices for food that I typically purchase have either risen noticeably (by as much as 12% for certain Asian food items) and/or are suffering from shrinkflation (e.g., when I make breakfast for me and my wife, I was not able to fit four bread slices on an IKEA plate that I use at home; but starting a couple of weeks ago, the bread slices--same brand and still paid the same price of $1.50/bag--now fit perfectly on the IKEA plate and this is not just because of the abnormally small batch of bread. I have bought bread two weeks in a row to know for sure that the sizes have shrunk).

Re: Soaring lumber prices add to the cost of a new home

#59

Post by teoruiz »

Honest question: why are houses in the US primarily built with wood? Is it just because it’s cheaper?

Even if it’s cheaper, is it worth to have a cheaper but obviously less durable building when compared to brick and mortar?

It’s always been baffling for my southern European mind.

Re: Soaring lumber prices add to the cost of a new home

#60

Post by almost_usual »

ixacto wrote: post #39
epicureanideal wrote: post #2

So about 0.3% of the price of an SF Bay Area home? At least in this area, the price has a lot more to do with NIMBYism than the cost of materials.

This is the real problem IMO. We need more dense condos like Chicago, where the median condo price is 268k versus other large cities where it is almost double that. This is just people being taking advantage of their housing...investment/tax shelter/savings plan that is bidding the price up. Look at something like this zero red flags that I can see for $219k that is much cheaper than in most other large cities, housi…

Condo prices have gone down in the Bay Area since COVID. The problem is everyone wants a SFH suburban lifestyle in the Peninsula, Marin, or East Bay hills. That’s a luxury and you’re going to pay a premium for it.
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