As people look for more living space, the prices of sawn timber are increasing.
In September, according to the producer price index of the Bureau of Labor Statistics, softwood prices rose by 28.6% (seasonally adjusted). This was the fourth increase in a row compared to the previous month.
Bottlenecks related to the pandemic and fires in the west contributed to this decline, as did an increase in housing construction and home renovations, according to Marcus & Millichap's fourth quarter special report on housing. With employers adopting liberal teleworking policies in response to COVID-19, workers have left the cities to look for more space in the suburbs and even in rural areas.
"Housing demand in rural and suburban areas is increasing relative to urban demand, which is a big change from where it was before," Jadon Newman, founder and CEO of Noble Capital Group LLC, told GlobeSt.com in an earlier interview. "But the cost of living in the city was expensive before the pandemic, and now the exodus is accelerating."
This wave of demand has increased interest in single-family homes. In a previous interview, Charles Brecker, partner at Saul Ewing Arnstein & Lehr, told GlobeSt.com that people were nervous about being in high-rise buildings during the pandemic. "Now people can move out of their 800-square-foot one-bedroom apartment in New York, Chicago or Miami and move to a place with more space and much less rent."
Another product of the pandemic-triggered urban exodus is that builders and redesigners have become much busier. The wood has become scarce.
While prices fell after rising in September, sawn timber is still 65% up on the previous year.
According to Marcus & Millichap, the surge in wood demand has canceled and delayed some projects. However, apartment developers say deals are still to be closed. "It didn't kill any of our deals," said Ken Valach, CEO of Trammell Crow Residential. "I think we're all working on it."
Marcus & Millichap suggests that the rise in lumber prices has increased prices for new homes; keep some tenants in apartments.
S&P CoreLogic Case-Shiller's NSA index of US home prices rose 4.8% in July.