Lumber Prices Are Creeping Back Up: Here's What Home Buyers and Owners Should Know

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  • Lumber prices soared to record highs earlier this year before dropping back down.
  • It looks like prices are on the rise again, which could be bad news for home buyers and those planning renovations.

Lumber prices fell over the summer, but that trend may now be reversing.

Earlier in 2021, lumber prices rose drastically, to the point where they were up 340% during the spring. Thankfully, they came down over the summer, giving builders a bit of a reprieve.

But now, Bloomberg reports lumber prices are creeping back up. Part of the reason has to do with the fact that lumber is in short supply -- a byproduct of reduced output from lumber mills and increased demand. If the cost of lumber keeps climbing, home buyers and owners alike could feel the pain.

Higher lumber prices could hurt home buyers

There's a limited supply of existing homes available on the real estate market, so some buyers may be turning to new construction in the absence of being able to find a suitable home for sale. But if the cost of lumber continues to rise, so too will the cost to build homes. Buyers may end up paying a lot more -- and getting stuck with much higher mortgages -- if this trend continues.

Earlier this year, buyers were paying an extra $36,000, on average, for new construction. In the coming months, that number could rise if lumber prices increase. That's because a lot of building materials have increased in cost due to supply chain issues.

Higher lumber prices could hurt homeowners

A lot of people began spending more time at home during the pandemic, and some people are now learning that remote work may become a permanent fixture in their lives. As a result, many homeowners are interested in renovating their living spaces to make them more comfortable. With lumber prices rising, that could end up being a more expensive prospect, depending on the nature of the project.

The good news is that because home values have soared on a national level, a lot of homeowners have more equity in their properties than they did a year or two ago. And so those needing to finance renovations may more easily qualify for a home equity loan or line of credit (HELOC).

But still, nobody wants to pay more for renovations than necessary. And if lumber prices keep climbing, that could be the reality for a lot of homeowners.

When will the supply of lumber pick up?

Bloomberg reports that supply chain bottlenecks could cause lumber prices to keep rising through the first quarter of 2022. From there, supply chains could catch up and the cost of lumber could drop back down.

The good news is that the winter months are less popular for home buying and new construction, as weather issues can cause delays in home searches as well as the building process. If the aforementioned supply issues resolve themselves by spring, home buyers may not feel the pain too badly.

Meanwhile, homeowners who are looking to renovate may want to consider pausing their plans and waiting for lumber prices to drop back down. Outdoor projects are generally better reserved for warmer weather anyway, so this may not be such an unreasonable route to take for some people who are planning home improvements.

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