You may recall that we completed a blog titled, “Is it cheaper to buy or sell a house?” last month.
We examined the cost of labor and materials for building a home in the Midwest, of which Bolivar, Missouri is obviously a part, and compared it to the cost of buying a home.
If you don’t have the time to click the link, the gist is it is cheaper and more convenient to buy a home than it is to hire a contractor and build a new house.
Little did we know that lumber was about to go through a shortage and price hike of enormous proportions.
This month, the National Association of Home Builders posted a story stating, “Due to insufficient domestic production and tariffs on Canadian sources, the price of lumber has staged a staggering increase in recent months.”
In fact, the price of “framing lumber” — two-by-fours and two-by-sixes — has risen about 80% nationally, on average, since April.
Jeromy Phillips owns Phillips Custom Home Builders, a commercial and residential construction company based out of Fair Grove, Missouri.
He says, locally, he hasn’t seen an 80% price increase for lumber but it has jumped and continues to climb.
“Lumber prices had taken a 27% increase during the first of July,” Phillips said. “Since then, they’ve gone up a total of 35%.”
Phillips said the cause for the shortage is two-fold.
First, the sawmills and other factories were shut down. However, the construction industry was still deemed essential and were allowed to keep building.
“So, we used up all that backstock [of lumber],” he said.
But while lumber is getting the headlines, Phillips said he’s noticing it isn’t the only one that is getting a price hike and becoming scarce.
“Everything across the board,” he said. “Whether it be appliances or furnaces. Anything that goes into the construction of a home.
“If you walk into Lowe’s you can see it firsthand. The amount of lumber that’s just no longer on the shelves because it is nonexistent.”
What does this mean for those who are looking for a home?
One, it’s obviously going to cost you more money to buy a home.
Phillips finished one home pre-covid and has wrapped up one recently. The cost difference is staggering.
“Right now, I’ve got a 2,350 square foot living area house off South National and Anthony Park [in Springfield, Missouri],” he said. “I’ve got a buyer for it for $400,000. The one I’ve got just north of it is basically the same square-footage house but I’m putting it on the market for $435,000. Just because of my cost increases.”
If you’re looking to build your new home, be ready to make some decisions on what you are willing to sacrifice should the cost of materials be more expensive than originally predicted.
Because prices aren’t leveling off. They’re still rising.
“When I start a home, I do an estimated cost sheet based off what the client can afford,” Phillips said. “But what happens is the lumber prices go up and, in turn, [the customers are] not able to pick out the original products they wanted.”
Because of this, a lot of people who were looking into having a new home built have backed off.
Phillips said he built seven custom homes last year. This year, he had five families who were looking to start construction at the beginning of the year.
Then, the coronavirus hit.
“The pandemic hit and those clients backed off what they were going to do,” Phillips said. “And they still haven’t done anything.”
The coronavirus has knocked down the full row of dominoes, so to speak.
It closed the factories causing materials and products to be scarce, slowed the construction of homes, and, in the end, the prices skyrocketed.
The end result? Phillips said it’s all going to get passed down to the customer.
“The consumer is going to get less for their money than they originally anticipated.”