Building materials are 25 percent of new home sales priceBuilding materials are 25 percent of new home sales priceDavid JonesJones, D.


The news this week about how much rising land prices add to the cost of a new home is only part of the story. Building materials themselves, particularly lumber, are going up as well.

According to a new Bank of America Merrill Lynch report discussed in builderonline.com, prices for homebuilding materials increased 3.6 percent annually from 1982 to 2017. During that time, building materials in a median-priced house went from $23,073 to $80,566.

Materials constitute roughly 25 percent of the sales price of a new home. The report — “Who Builds the House" — puts the total annual cost for building materials in new U.S. single-family residences at $55 billion.

“Again, nobody builds to an average or aggregate, so for different geographical markets, different square footages, different customer segment specs, different national and local deals and installation nodes, these figures can become far from precise when it comes to applying them to specific projects," writes John McManus, director for the Residential Group at Hanley Wood.

The Builder article notes lumber prices have trended higher since duties of more than 20 percent were applied to Canadian softwood lumber in 2016. Imports from Canada declined from 16 billion board feet in 2016 to 14 billion in 2017.

Earlier this year, the Wall Street Journal reported lumber was in short supply and prices rising as wildfires destroyed prime forest:

“Material prices now rival labor shortages as builders' main concerns, a National Association of Home Builders survey showed in January. Prices for common building varieties like spruce and southern pine are at or near records, according to price-tracking publication Random Lengths. March-dated lumber futures at the Chicago Mercantile Exchange hit a record of $532.60 per 1,000 board feet last week after climbing more than 50 percent in 14 months."​


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