Soaring Lumber Costs Cause Spike in Home Prices

Stacey Worthington, president of the Citrus County Building Alliance, said reports from her builder-members indicate lumber prices locally are up 40%-50% and adding $10,000 to $12,000 to the price of a single-family home.

Worthington said COVID-19 led to lumber yard lockdowns for a time, resulting in a lack of production in materials. That led to high demand and low supply so prices increased.

“Hopefully, as COVID restrictions are lifted across the country, it might alleviate the problem,” she said. “We have a lot of demand right now for affordable housing but no supply.”

Crystal River Mayor and homebuilder Joe Meek said higher lumber prices and other construction materials are freezing lower-income people out of the market. He said the lack of affordable housing — apartments, condos and multi-family housing — has been a problem in the county and this will exacerbate the situation.

“That is a concern,” he said.

As if lumber price increases aren’t enough, Meek said he got word this week that drywall prices are going up 20%.

Who’s to blame?

Grubbs blames much of the soaring prices to “greedy lumber mills” that are purposely keeping supply low to drive up costs.

Many in the public, he said, are unaware of how bad this situation is becoming. If gas prices went up $8 overnight, there would be mass protests, he said.

But rising lumber prices, he said, seem to fly under the radar except for those who work in the construction industry and folks who want to buy a home.

Grubbs said he knows of one builder who had to raise the price of one of his model homes from $180,000 to $229,000 just to break even.

Two years ago, a truss sold for $48. Today, it’s $90, he said.

Grubbs figures he’s had to eat $150,000 because of locked-in prices he quoted to customers last year.

Now, Grubbs said he only guarantees prices for 15 days in case he has to change an estimate. And for contractors, he’s quoting a price based on today’s cost but won’t give a final price until 30 days prior to fabrication — just in case.

What’s keeping the home-construction industry going right now are the low interest rates and pent-up demand for new homes, he said.

‘On the cusp’

It’s even worse throughout the country.

The National Association of Home Builders (NAHB) said the average price of a single-family home has risen more than $24,000, and many clients are having to walk away because they can’t afford the increase.

“This fast-price escalation is having far-reaching consequences throughout the industry, and prohibiting home builders and partner organizations from providing much-needed housing to families across the country,” the NAHB said in a statement.

Bruce Kaufman, president of Bruce Kaufman Construction in Homosassa, said he’s holding up so far.

Kaufman said he limits himself to building 51 homes a year and that hasn’t changed due to higher lumber costs.

At least, not yet.

“I feel we’re on the cusp of it affecting things,” he said.

Kaufman said if the situation is not reversed, many in Citrus County will be priced out of the market.

For example, the lumber package it used to cost him to build a smaller home (about 1,200 square feet) was $6,500. Now it’s $15,000.

“I really feel for the younger first-time homebuyers or older people not as fortunate in their early lives to save a lot of money,” Kaufman said. “We really can’t fulfill those people’s needs.”

Kaufman said it might help to boycott the lumber industry for a week but doesn’t believe it will happen.

Impact at Habitat for Humanity

Habitat for Humanity of Citrus County’s goal is to build 21 homes a year for income-challenged families unable to qualify for conventional financing.

Despite lumber prices doubling in the past 14 months, the nonprofit organization intends to keep building at that pace, said President/CEO George Rusaw.

But there are definite challenges ahead.

Because of the hike in lumber and other materials — not to mention appliances — the local Habitat is about $225,000 over budget in construction costs. That translates to around $10,000 more for each home built.

“To address that, we’ve been working hard trying to raise more money to offset that,” Rusaw said. “Fortunately, we have capital reserves to where it won’t keep us from building those 21 homes. But we can’t keep dipping into reserves.”

The pandemic has curtailed fundraisers but, fortunately, other donations have been coming in at a healthy pace, he said.

Still, “we need all the help we can get,” he said.

When the pandemic hit, lumber mills and appliance manufacturers curtailed production, figuring home demand would halt.

“Just the opposite happened,” Rusaw said. “The buying public went out and they started buying existing homes and brand new homes at almost record paces,” he said.

It was the classic scenario: high demand, plus low supply equals higher prices.

Citrus County ‘well-positioned’

Meek said prices may be up but he doesn’t see a drop-off of new-home construction in Citrus County.

There is a nationwide trend now where folks are leaving the big cities and moving to rural areas and still be near amenities.

Citrus County fits the bill, said Meek, who owns Citrus Builder.

And even with higher local home prices, they are still a better buy than the metro areas, he said.

“I think that Citrus County, from a community standpoint, is extremely well-positioned in regard to growth and the future,” Meek said. “We are a community in demand with the lifestyle we offer and the amenities that we have.”