How is COVID-19 impacting construction costs across Montana?
Like many small metro housing markets, Montana’s major cities are seeing home prices shoot up. But it’s not just the departure from coastal areas causing housing prices to soar. Rising construction costs are increasing prices across the country.
According to the National Association of Home Builders, lumber prices rose over 100% since mid-April. This dramatic increase in lumber prices means accounts to a $16,000 addition to the price of a typical new single-family home.
The materials that have seen the most increase are soft sheet goods, such as Oriented Strand Board (OSB) and plywood. Historically, these options were 15-20% cheaper than metal and fiber cement lap siding. Now, they are more expensive than these alternatives.
A marked lack of domestic production contributes to higher prices. COVID-19 reduced production as mills implemented social distancing and work from home orders. Without control over spread of COVID-19, prices are likely to remain elevated.
Industry leaders anticipated that the demand for housing would wain as the pandemic worn on. But the housing market has weathered the storm better than anticipated. In turn, the demand for lumber has accelerated.
Additionally, NAHB suggests temporarily lifting tariffs on Canadian product could slow the rising lumber costs.
It’s not just home buyers experiencing sticker shock. With few public events and activities, DIYers working on those home-improvement projects are also racking up hefty bills at the lumber yard.
Considering buying a home or taking on even a minor renovation? Adjust your materials budget accordingly for the time being. Sterling CRE Advisors will continue tracking these trends and reporting out.
