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What does your latest home-improvement idea have to do with the Wasatch Front’s exploding housing prices?
Lumber, for one thing. Or a lack thereof.
That main ingredient in homespun do-it-yourself projects and custom home remodels has more than tripled in price since the pandemic’s early days.
It’s been a long year of mill shutdowns, global trade hiccups and other coronavirus-related blows to wood product supplies. Then, last week observers saw the equivalent of panic buying on lumber futures — a sign that costs of everything from a few two-by-fours to truckloads of framing lumber for new subdivisions could shoot even higher.
Dejan Eskic is a recent Utah homebuyer still in shock over our rapidly climbing home prices.
“It’s pretty crazy. There’s nothing to buy,” he said, a personal experience that aligns with newly released data on the region’s housing crunch.
Eskic is also an economist and housing researcher at the University of Utah’s Gardner Policy Institute, analyzing Utah housing markets’ historic pandemic mood swings.
“It’s a horrible time right now to make any big changes in your residential situation,” he said, referring to home remodeling and homebuying alike. “Everything’s just gotten so expensive.”
Waves of new demand for homes are expected in Utah and across the U.S.
Utah’s housing gap
Fair warning: You may end up turning away in sticker shock this summer after waiting in line at your local lumber yard in hopes of finishing that deck project or home remodel.
Rising lumber costs could add as much as $35,000 to the average purchase price of a new home, according to new estimates from the National Homebuilders Association. For future renters, the increase in costs will mean roughly $119 more in monthly rent.
A historic upswing in residential construction this season also means builders often can’t even find wood amid the crunch that’s slowing down smaller custom building plans and some of the state’s largest projects.
“At times we don’t even have a single option, let alone multiple choices,” lamented Jaren Davis, executive officer of the Salt Lake Homebuilders Association. “And it’s not just our industry. It’s kind of a wider business problem now.”
Estimates are Utah already needs at least 50,000 more moderately priced homes for sale and apartment rentals to catch up on a gap that’s been growing since 2010.
Beyond that, projections are that thousands upon thousands more housing units will be needed in future years, as a relatively high birthrate, job-creating economy and in-migration to the state continue to push Utah to double its current population sometime before 2060.
Though borrowing costs are low, lumber prices are making it even tougher to build Utah out of that affordable housing deficit. It’s not just lumber that’s driving up home and apartment costs. Land, labor and other building materials are also rising.
“You just name it: copper, cement, furniture, appliances,” Davis said.
One window supplier, he said, is falling 700 windows behind daily — at maximum production.
Lumber prices are up an estimated 300% since late April 2020. Cost hikes and disruptions in the region’s lumber supply chain are now shuddering across retailers, wholesalers and builders in Utah’s construction sector, which has been bright spot in retaining and expanding jobs during the pandemic.
Few people want customers to get their wood as much as Jason Butterfield does.
The division manager over lumber for Sunpro, one of Utah’s largest building suppliers, walked across thinned-out stock lots at the company’s main Salt Lake City location Tuesday near the end of another hectic day of sales.
The 28-year industry veteran says he started working in lumber yards as a kid and has never seen a supply pinch this deep. He said he’s torn regularly over having to let even a few of his longstanding clients down.
“There’s just a ton of pent-up demand that can’t be met right now,” Butterfield said. “It’s been a roller coaster ride and it just kind of sucked the life out of you.”
How’d we get here?
Mills across the Pacific Northwest and Canada that normally feed lumber into Utah shut down with the pandemic’s initial U.S. arrival. Some anticipated demand would slow, along with other commodities, as the crisis took hold.
But the opposite happened, especially as sectors like home improvements and furnishings took off. Utah and other states crafted their first health edicts to make construction and real estate workers essential and lockdown-exempt. Regional suppliers never really caught up, their customers say.
And even as U.S. vaccination rates climb, there are worries that some overseas timber suppliers might continue to be slowed by COVID-19 outbreaks and resulting lockdowns.
Two building booms
Residential building in Utah has been humming and is now near or above its levels of March 2020, at about $640 million a month. You’d expect that number to climb anyway, with the typical peak construction season.
But now it’s spurred by historic demand.
The pandemic and low interest rates have since blown up housing markets with a surge of buyers, in Utah and across the country. Young adults built savings during prolonged social distancing, and many of those nest eggs are now hopes of a down payment.
The upswing in home shopping since this time last year has all but gutted available home inventories for the region, with Utah’s capital seeing one of the largest supply drops among all U.S. cities.
Though the state’s economy is recovering faster them most, the first quarter of 2021 saw home sales decline across Salt Lake, Utah, Davis, Weber and Tooele counties, compared to the same months in 2020 . Home prices, at the same time, grew by double digits year over year in most locales.
Salt Lake County’s median sales prices is now at $468,000.
With home supplies at all-time lows, Utah builders and homeowners are chasing building permits and new construction in record numbers.
The state is expected to add roughly 30,000 units this year, almost on par with the 30,745 built in 2020, according to data prepared for Utah Gov. Spencer Cox. Records show at least 26,000 single-family homes, condos, town homes and duplexes have been approved for construction in Utah since January 2020 alone, along with 9,820 apartment units.
And right alongside, a home improvement surge has expanded into its own “perfect storm,” as one Utah builder put it. After dipping to about $80 million when COVID-19 jitters were high last May, data shows Utahns drew permits for home additions, alterations or repairs worth $485 million in January and February in advance of warm weather.
Many homeowners who might’ve otherwise sold in this crazy housing market chose to stay home for fear they couldn’t afford to move. Instead, they refinanced their mortgages and, frequently, drew out cash to put toward remodeling projects.
How will it shake out?
It’s hard to say, exactly, though several economists are predicting the shortage in lumber and resulting cost spikes won’t ease anytime soon. Estimates are that framing lumber is about a fifth of all material costs in home building — and that’s headed upward for the near future.
“As large as the gains are in new home sales lately across the country, I tell people it understates the strength of demand,” said Mark Vitner, managing director and senior economist with Well Fargo. “But we’re not suddenly going to get a whole lot more lumber and a whole lot more workers.”
The trend has reshaped many lumber supply chains already. It also has spurred some homebuilders to build smaller and consider different, and in some instances, more environmentally-friendly building materials instead of processed wood.
Some market watchers are predicting that if vaccination rates continue to rise, some would-be home remodelers may put their DIY aspirations on hold as they head back to the office instead of working from home.
Or, they may just decide those plans are now too pricey.