US & Global Economic Impact Analysis and Forecasts

Freedonia analysts and economists are sharing their insights on how major events are impacting different parts of the US and global economies.

High Lumber Prices Pose Threat to New Housing Market

As reported multiple times on this site, the home improvement and new single-family housing markets – and, to some degree, the construction market overall – have been sources of economic strength during the COVID-19 pandemic. A general shortage of housing in the US, coupled with rising interest among city dwellers in moving to the suburbs (and beyond), has spurred home builders across the nation to complete residences as quickly as possible.

However, this surge in home building activity has been threatened not by the coronavirus, but by something that has proven to be as difficult to control: rising lumber prices (a trend that has also been well-chronicled on this site).

This sharp rise in framing lumber prices – up 130% in the last four months  – has added tens of thousands of dollars to the costs of building a residence, which in turn is passed on to the consumer. These rising costs – estimates place the increase at about $16,000 per home ­ – may price new homes out of the range of many buyers’ budgets, seeing as they may be suffering economic losses of their own, such as due to unemployment or reductions in  wages related to the various “shelter-in-place” orders issued by many state and local governments. Other builders will work to keep homes affordable by erecting smaller residences with fewer amenities (such as crown molding or decks) that can be sold at lower price points. However, some buyers might not be interested in these residences, preferring instead to wait until a home that meets their wishlist and their budget becomes available.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly in Construction and Building Products. Freedonia also offers an expanding catalog of COVID-19 Economic Impact reports, which highlight how various industries are responding to the current crisis with a comparison to recent recessions. Freedonia Custom Research is also available for questions requiring tailored market intelligence.