Cost to Build a New Home is Surging

08.28.20

Chart of the Week – Cost to Build a New Home is Surging

Housing demand remains strong and supply is tight for both new homes and inputs, according to the National Association of Home Builders (NAHB). Home builder confidence has reached an all-time high because of low interest rates, a renewed focus on the importance of housing and a shift in demand to the suburbs.

The demand for new homes has caused prices of its main input, lumber, to soar. Prices for framing lumber have risen 230% since the beginning of April. The NAHB estimates that the spike in lumber prices that occurred between April 17th and August 21st caused the price of an average new single-family home to increase by $16,148. Although record-low mortgage rates are damping the effect of higher input costs for now, NAHB economists are concerned that demand for new housing could be hurt if lumber prices remain elevated.

Framing Lumber Prices
Chart Showing Framing Lumber Prices
Chart Showing Framing Lumber Prices

Source: National Association of Home Builders, Chicago Mercantile Exchange, Bloomberg. Data shown is from August 5, 2019 through August 24, 2020. This chart is being provided as a general source of information for education purposes only, and is not intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy.