Just as the homebuilding industry is revving up for summer, tariffs imposed on lumber imports are helping to send housing construction costs through the yet-to-be-completed roofs.
Duties averaging more than 20 percent on Canadian shipments of timber to the United States imposed last fall by the Commerce Department, combined with rising labor costs caused by a widespread worker shortage, are dramatically increasing the cost to build homes in the Chippewa Valley and throughout the nation, said Christina Thrun, executive officer of the Chippewa Valley Home Builders Association.
The National Association of Home Builders recently declared that soaring lumber prices since the beginning of last year have added more than $7,000 to the price of a typical new home, but a local lumber dealer said that figure likely already is too low.
Kevin Anderson, branch manager of Lyman Lumber in Eau Claire, said lumber prices probably have gone up an additional 20 percent since that figure was reported, likely pushing the impact on the cost of an average new home to at least $10,000.
“Every week we set a new record high for lumber prices, and that’s basically been true since the first of the year,” Anderson said. “It’s pretty amazing.”
Prices are rising so fast that Lyman has been compelled to tell customers its lumber quotes are good for only a week.
“That is almost unheard of in our industry,” Anderson said, explaining that price quotes traditionally have been honored for three months or more. “From our perspective, you can’t even get your feet underneath you because of the trajectory of prices going up, up, up.”
Such volatile conditions are difficult for builders and homeowners, demanding communication and understanding when rising lumber prices are passed on to consumers through higher bids from contractors.
“It’s tough on homeowners because the value of their new home hasn’t increased, but the cost of building it has,” said Adam Ashley, owner of Chippewa Falls-based Ashley Construction and past president of the Chippewa Valley Home Builders Association.
So far, Ashley said, the steeper price tags haven’t squelched local demand for housing, as most homeowners are still moving forward with building plans.
“The housing market remains strong. People need new homes and are still building at a high rate, but each and every family building a home is being penalized right now,” Ashley said. “Not everyone is able to say, ‘Sure, we’ll spend more money.’”
Some buyers are having to make difficult decisions, Thrun said, choosing between going over their intended budget or cutting back on features, trim levels or even the size of the dream home they’ve been planning.
“For the person looking to build a $200,000 or $250,000 house, an extra $10,000 in lumber costs could make a big impact on what you’re able to build,” she said.
The price increase may even be significant enough that some homeowners could decide to give up their dream of building, Thrun said.
At Lyman, the changing market is evident in the drafting department, where the Eau Claire branch draws up plans for about 500 houses a year. More often than not in recent months, the drafters are drawing those plans two or three times as rising lumber prices cause people to scale down their house plans to maintain affordability, Anderson said.
“I don’t mind prices inching up a little bit, but it can’t be on a rocket ship like it has been,” Anderson said, estimating that lumber prices have climbed by about 60 percent since the start of 2017.
That’s an alarming increase for a core component of most houses, especially with talk escalating about a potential trade war that could lead to more tariffs on imports of metal, shingles, drywall and other building materials, Anderson said.
With the demand for lumber exceeding the domestic supply, homebuilders have little choice but to continue relying on imports. The National Association of Home Builders reported that the U.S. consumed 47.1 billion board feet of softwood lumber in 2016 while producing 32.8 billion board feet. That 30 percent shortfall was made up by imported lumber, 95 percent of which came from Canada.
The organization’s leaders, who characterize the tariffs as a tax on homebuilders and buyers, have predicted the duties on Canadian lumber will result in the net loss of more than 9,000 U.S. jobs in 2018.
Call for action
With the housing market so strong, Ashley said, U.S. and Canadian representatives don’t seem motivated to reach an agreement to end the new tariffs.
“But at some point, if prices continue to rise, I feel like it could really slow things down,” Ashley said. “And when the homebuilding market is strong, it’s good for the whole economy.”
The Chippewa Valley Home Builders Association is encouraging its members to contact their representatives in Congress to push them to get the federal government to work with Canada to find a solution. Rescinding the timber tariffs would make an immediate and positive impact on housing affordability in the United States, Thrun said.
In the meantime, homebuilders and buyers likely will continue to struggle with historic inflation for the foreseeable future
As Anderson said, “Nobody knows how long it will last.”
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