Increase seen in home construction costs

by bkrigbaum@solagroup.com

BOSTON, April 26 /PRNewswire/Crow’s Weekly Market Report today reported that the total cost of lumber and panels for construction of a 2,116 sq ft home is nearly double that of year-ago levels. Based on the Crow’s Construction Materials Cost Index (CMCI), the wholesale cost of lumber and panels for framing an average home has risen from $3,829.98 in April 2009 to $7,088.60 today.

In addition, Crow’s noted that when these figures are applied to the March 2010 single family housing starts number of 531,000, the potential exists for an additional cost to the home building industry of $1.7 billion. This rise can be attributed to the continuation of a uniquely supply-driven lumber and panel market. Crow’s reported that while sustained and unexpected price increases for lumber and panels have been seen in the recent past — specifically in the 2004-2005 timeframe, those increases were almost solely driven by demand from new housing starts. Crow’s notes, that in today’s markets, retailers, wholesalers and producers alike have learned to get by with as little inventory as possible, in an effort to keep ahead of an expected drop in demand and prices as North America continues to fight its way through the mortgage crisis and debilitating economic times.

Ken Tennefoss, Executive Editor of Crow’s Weekly Market Report, commented, “While we recognize that it is highly unlikely for lumber and panel prices to remain at these levels for the remainder of the year, it is worth noting that in 2004, there weren’t too many people in the industry that believed the price of 7/16 OSB would reach $520, and yet, of course it did.” He continued, “It’s important, now more than ever, to be aware of price changes. From the manufacture to the guy nailing up 2x4s, the impact of change can be tremendous.”

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