Home Builders Pinched by 30% Leap in Lumber Prices
A 30% jump in lumber prices over the past six weeks is putting a squeeze on beleaguered home builders, who have been forced to hold the line on prices because of the soft housing market, industry officials say.
Lumber prices, which make up about 7% of the cost of building a home, have been on a steady upswing since February. The jump has added as much as $3,000 to the cost of constructing a $150,000 home.
Officials of the National Assn. of Home Builders in Washington attribute much of the price rise to a May 23 federal court injunction by U.S. District Judge William L. Dwyer that blocks most U.S. Forest Service timber sales along the West Coast in order to protect the habitat of the endangered northern spotted owl.
The timber-sale suspension comes on top of recent Forest Service conservation efforts to reduce annual lumber harvests by 20%.
“I don’t know how many acres this little (owl) needs to live, but preserving the forest for him is going to put a lot of builders out of business,” said Ira Norris, president of Inco Homes Corp. in Upland. Norris said his suppliers have recently increased lumber prices so much that he is exploring substituting steel studs for wooden ones.
The injunction affects about 66,000 acres of land in 13 national forests on the western slope of the Cascades in Oregon and Washington and four forests in Northern California.
“While builders support sound environmental policies, (the timber-sale injunction) is an example of how overly restrictive wildlife and preservation constraints can disrupt a market and drive up costs for American consumers,” home builders association President Mark Ellis Tipton said in a prepared statement.
Jim Blomquist, a program director at the Sierra Club’s Washington offices, said there is “certainly going to be some impact from the decision since the Northwest produces a sizable share of timber.” But he said that while there may be “some short-term speculation . . . over the long run, lumber price increases are going to be a small factor in housing compared to the increased cost of land and mortgage rates.”
Judge Dwyer’s ruling would not immediately end logging in the region because many lumber companies already have purchased substantial amounts of timber that has yet to be cut. What’s more, experts say, even when old logging contracts expire many suppliers may find it difficult to pass on price increases because overall lumber demand is down because of the housing slump. In fact, after a steady run-up since February, lumber prices began to dip late last month.
“I don’t think lumber mills are in a position to pass along any increases because there is so little demand,” said James F. Wilson, a housing industry analyst for Montgomery Securities in San Francisco.
However, while demand for lumber may be low, traders seized upon the spotted owl decision to raise prices nonetheless. The prices reached a record high of $311 for 1,000 feet of board on June 14, according to industry statistics.
“Lumber is like oil or any other commodity,” said Duane Betty, president of the Antelope Valley division of Kaufman & Broad Home Corp. “When traders see anything negative--like the spotted owl decision--they naturally react by driving the price of lumber up.”
