The great pandemic lumber shortage that delayed construction and pushed US home prices to record levels is easing up—at least for now.
After months of scrambling to stock up on lumber, more than half of US building material suppliers said in March inventories are back to pre-pandemic levels, according to the latest Burns Building Product Survey—which covers about 6% of the market for lumber dealers.
After floods in British Columbia disrupted supply late last year, lumber producers are getting back to their previous output. Building suppliers, meanwhile, are finding alternate shipping routes to get around supply chain issues, including a shortage of rail cars.
As a result, lumber prices have been dropping.
All of this means that parts of building a home, like decking, could get easier and cheaper. Still, housing prices are expected to remain hot.
When will US house prices come down?
While supplies of building materials are growing, demand for homes remains hot even though mortgage rates hit 5%. Economists expect that eventually higher interest rates will cool off the home-buying frenzy.
So far, bidding wars have created an environment where even while some buyers no longer qualify, cancellation rates remain low because more buyers come up behind them to snap up houses, said Chris Beard, a research director at John Burns Real Estate Consulting, which puts together the product survey. People who would normally put up their house for sale in order to buy another one are holding off, keeping home supplies low.
Homebuilding suppliers predict prices for engineered wood (including lumber) will rise 18% over the next year, and building supplies by 11%.
“Builders have been able to pass these costs onto homeowners without really eating into margins,” Beard said. “It’s going to be interesting to see what happens to builders’ margins, if they can’t really pass on those costs to homeowners.”