Here’s How Developers Are Adjusting to Rising Lumber Prices
January 10, 2022
Crystal Sunbury, real estate senior analyst with RSM US LLP, tells GlobeSt.com that pre-ordering lumber helps builders to secure prices and availability. According to a recent NAHB survey, 29% of builders reported placing pre-orders. “This can be effective as builders look to secure materials for the spring building season; however, builders must also factor in the cost of storage fees and insurance,” she said.
Builders have also been successful obtaining price guarantees from suppliers to avoid the rising costs, with 22% of builders reporting obtaining such guarantees, according to the NAHB survey, Sunbury said. “Although these are generally only guaranteed for short periods of time, with most builders obtaining guarantees for less than 30 days.”
The longer term picture, though, is worrisome. “Without a solution, developers must adapt to new forms of construction, including manufactured housing, non-lumber-based materials, and higher density of smaller units to attempt to keep the cost to each consumer within an affordable range,” Chris Loeffler, CEO and co-founder of Caliber Cos., tells GlobeSt.com.
Renters and homeowners can hardly afford the increases either, especially when coupled with other rising development costs, David M. Curry, Attorney, Farrell Fritz, P.C., New York, tells GlobeSt.com. These include uncertain real estate taxes and COVID-related market conditions such as limits on the number of workers allowed on a job site and they have forced multifamily developers to increase rents that renters can ill-afford.
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