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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

#81

Post by Der_Einzige »

toomuchtodo wrote: post #41
andrewmcwatters wrote: post #19

Earlier quoted context omitted.

I agree. Politicians have weak incentive to push back I assume? If you do, you put average people at REITs out of work. This isn't a terrible thing if you ask me, because not much of it is real estate specific. REIT HR people can find work at other companies, developers and salespeople, too. But it's not a good look, I suppose? Real estate is a real problem that no one seems to want to touch. "The rent is too d*mn hi…

A fun question we kick around and model in a financial forum I participate in is, “How much insolvency occurs economy wide for every 100 basis points (1%) the Fed increases their interest rate target?” If interest rates go up, real estate and equities prices come down, and US gov borrowing costs increase. Borrowing costs go up for zombie firms and they fail. How much appetite is there for any of that? The same as lon…

No, if interest rates go up, the acceleration of real estate and equities prices will slow. There are too many real factors which are causing the acceleration of housing prices for interest rates hikes to totally cancel it out.

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

#82

Post by Gibbon1 »

teoruiz wrote: post #59

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.

Depends on where you are in the US. There are a lot of brick and stone buildings in the northeast. Florida because of hurricanes they tend to build houses out of cinder block. In California because of earthquakes they tend not to build with masonry.

That said the US historically had a lot of wood. Most everywhere. So it was cheap and light[1] easy to transport. And wood if it's kept dry is durable. My house is 70 years old. The wood framing is totally solid. Previous house is 115 years old. The framing is also solid.

[1] House built of wood is probably 1/4 the weight of a house built of masonry.

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

#83

Post by croutonwagon »

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…

The Federal government has a TON of subsidies for first time buyes and even more for veterans.

The issue is part land scarcity driving up the cost of land and part the transition of our economy out of production and into consumerism.

Building has never been cheaper, and even quality has improved, including working through some pretty bad materials changes (like PEX plumbing, or chinese drywall).

We no longer really do nearly as much blue collar work as we used to, and many of the unskilled blue collar jobs have seen ridiculous wage stagnation. Companies have offloaded that to China, Mexico, Vietnam, etc, where they havent automated it.

Heck our population doesnt WANT those jobs. Theres a TON of demand for trades work and more are retiring than filling those gaps, but our society has pushed hard to posit that college is the only path to success and trades work is to be looked down upon.

Add to that our population has never been higher. In fact its growth has stagnated the worst since the Great Depression based on the intials of the 2020 Census, which is not a good omen.[1]

https://www.pbs.org/newshour/nation/census-texas-gains-congr...

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

#84

Post by kaydub »

dcolkitt wrote: post #72

A lot more builders should be looking into steel framing. Light gauge steel has also gone up, but nowhere near as much as lumber. For the typical project, it's probably cheaper now than wood framing. Especially when you take into account that steel framing can be pre-cut at a factory with CAD software, requiring much less skilled labor onsite. And steel makes a much better frame. Fire resistant, termite free, mold fr…

A lot of wood framing is being done at factory and then assembled on site.

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

#85

Post by akiselev »

hippich wrote: post #77
throwaway0a5e wrote: post #32

Earlier quoted context omitted.

Lumber prices are not the same nation wide because lumber is not thaaaaat expensive to manufacture per volume/weight so shipping costs to get it from mill the mill to the end user are a larger and larger portion of cost the farther from the mills you get.

I just compared prices of 2x4 and construction grade plywood between Lowes location in SF area and Austin area. They are pretty much the same. I agree, distance from the mill will matter, but not to a significant degree (not 3 times for sure)

IME big box store prices are 2-3x that of a real lumberyard for low volumes. I don't think they're reflective of the rest of the market, especially at high volumes. When you're talking an order of 100 or 1000+ board feet from a lumberyard, it's a completely different story. I've had situations where the last mile delivery fee alone was 25% of the cost, not including the cost to get it to the lumberyard in the first place.

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

#86

Post by WDCDev »

My family moved into our newly built home in the northern suburbs of Pittsburgh in Oct. of last year. We were part of the first group of buyers in a relatively new plan of higher-end homes.

Since Oct. of last year, the base price of our model has gone up $215,000 and every lot in this phase (phase 1) has now sold. I suspect at least half of that increase is materials, and the rest is due to market demand.

The market is just crazy and in talking to my builder he has said supply shortages could last through EOY and into next.

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

#87

Post by bluGill »

jonfw wrote: post #76
bluGill wrote: post #61

Earlier quoted context omitted.

You can though. Most of the labor is in skills that are easy to teach. You can take your half your seconds and promote to foremen, the other half as seconds under the old seconds. The foremen get the old third line as seconds, and you hire all new third-line people. There are a few people who aren't worthy of, or don't want that promotion, but overall the limit is how fast you can convince inexperienced people to wor…

With residential construction, most of the jobs are being contracted and subcontracted out, so promoting new foreman, etc. isn't even overhead the builder worries about. They just get new crews bidding on jobs out of nowhere

You are at least half right. The new crews are not out of nowhere though - the builders know who the good foremen are, so when those foremen go on their own they will take them. Builders don't just take bids from anyone, they call the companies they always use to bid on a job. The builders often keep the same crews busy year round: there is no bidding, just at the end of one job they tell the crew where the next job is. When a builder has more work than crews they contact their current sub contractors and ask if any want to expand.

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

#88

Post by ComputerGuru »

akiselev wrote: post #85
hippich wrote: post #77

Earlier quoted context omitted.

I just compared prices of 2x4 and construction grade plywood between Lowes location in SF area and Austin area. They are pretty much the same. I agree, distance from the mill will matter, but not to a significant degree (not 3 times for sure)

IME big box store prices are 2-3x that of a real lumberyard for low volumes. I don't think they're reflective of the rest of the market, especially at high volumes. When you're talking an order of 100 or 1000+ board feet from a lumberyard, it's a completely different story. I've had situations where the last mile delivery fee alone was 25% of the cost, not including the cost to get it to the lumberyard in the first p…

That’s besides the point. Divide both numbers by 2-3x and the argument stands.

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

#89

Post by kokanator »

vkou wrote: post #7
colinchartier wrote: post #5

> Lumber tariffs had prices already rising a year ago, but then when the pandemic hit, production shut down. The expectation was that housing demand would dry up for a long time. But instead, after a brief pause, it came roaring back. How can this be the case when lumber prices are surging in Canada as well? You'd expect that if the price was in response to tariffs then the origin country would be flooded with supply…

Marginally profitable mills shut down/go bankrupt when tariffs are introduced, and unlike AWS instances cannot be spun up on demand.

Does it feel like we have squeezed a critical part of our infrastructure here allowing it to go bankrupt? This could have lasting affects for decades.

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

#90

Post by kokanator »

paulpauper wrote: post #14
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…

if home prices keep surging on a real basis , a 30-year morttgage becomes attractive proposition, especially given how cheap it is to borrow .

Does anyone remember this type of home buying craziness is what happened just before the bust of 2008?
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