By Natalie DeCoste
The cost of lumber is still on the rise, and now the increased price tag is affecting the development of new apartments.
During the past few months, the cost of lumber has primarily impacted the housing market. During April, U.S. home construction fell by 9.5%, according to U.S. Census Bureau data. New single-family housing construction declined by more than 13% from the month prior, an all-time pandemic low. This fall was attributed to the rise in lumber prices, which added more than $30,000 to newly-built single-family homes this past year.
Now the impact of these elevated prices has traveled to multifamily property developers like Greystar Real Estate Partners LLC and Trammell Crow Residential. Both companies indicated that they are experiencing the same sticker shock regarding lumber as single-family home builders.
Multifamily developments, or apartment complexes, are primarily made of steel, glass, and concrete, but wood is also a major component, especially in low- and mid-rise buildings. Lumber is also used extensively for floors, cabinets, and other finishes. It is also used for framing in these developments.
Softwood lumber’s price is at a record high, up over 83% from the same period last year, according to CoStar Advisory Services. Meanwhile, the cost of lumber overall is also at record levels, up 34% from one year ago.
“Our belief is that this cycle that we’re currently in … is here for the foreseeable future,” said Kyle Little, chief operating officer at Sherwood Lumber, a privately held New York-based wholesale distributor.
Lumber hit a record high price on May 10 of $1,711 per thousand board feet. Lumber and plywood prices typically rise in the spring and drop by the end of fall by about 5%, but experts are not expecting the same trend this year.
Part of the cause for high prices in the lumber market is the demand in the housing market brought on by the pandemic. Multifamily construction is seeing similar highs to the ones experienced by single-family homes.
Multifamily construction hit a record level during 2020. The record can be traced back to strong rent growth, according to CoStar. Suburban rents were up 4% in the first quarter of 2021, according to CoStar.
The material costs for products used in multifamily developments are up 25% to 30% over the past year, according to CoStar. That increase—not just in prices for lumber but for other commodities like fuel, copper, and steel.
