Lumber Adding to Increased Costs as New Home Demand Remains Stable

September 17, 2020

Lumber Adding to Increased Costs as New Home Demand Remains Stable

Our latest State of the Industry Report, compiled by BTIGcontinues to show that rising lumber prices are driving up costs for home builders, leading to more builders raising prices to offset the costs. So far, the move has not resulted in negative impact on sales as demand strength for new homes continued in August. 

The survey included 88 responses from small to midsized home builders across the U.S. Seventy percent of respondents reported increasing some, most or all base prices in August compared to 66 percent in July and 29 percent in August 2019. A record high of 94 percent of builders reported month-over-month increases in material costs versus the previous record high in July of 84 percent.  

Sales are still impressive though, with 69 percent reporting positive year-over-year sales growth and only nine percent reporting declines. The survey suggests builders are still experiencing robust market conditions and pricing power.  

Highlights from the latest State of the Industry Report

Sales and traffic. August’s sales numbers were slightly lower than July’s when 73 percent of builders reported year-over-year increases in sales orders (that compares to 49 percent in August 2019). Traffic is also stable with 58 percent reporting a year-over-year increase, compared to 60 percent in July. 

Expectations. Sixty-two percent of builders reported sales as better than expected, compared to 71 percent in July. Only eight percent saw them as worse than expected. A record high of 57 percent saw traffic as better than expected, while a record low of five percent saw it as worse than expected.  

Pricing and incentives. As indicated, builders are continuing to raise prices, while incentive usage has moderated. Only six percent of respondents increased some, most or all sales incentives compared to 13 percent in July and 25 percent in August 2019. 

Input costs. Outside of lumber costs, 38 percent and 35 percent reported increasing month-over-month land and labor costs, respectively. Fewer builders reported higher land costs, which was at 43 percent in July, while builders noting higher labor costs rose from 31 percent in July. 

HomeSphere/BTIG State of the Industry Report

HomeSphere partners with the research firm BTIG to create a monthly report to provide our builders and manufacturers with exclusive and timely insights about the market.

To compile the report, we survey HomeSphere’s 2,600+ regional and local home builders about sales, traffic, pricing, labor costs and other key industry metrics.

How to get the monthly report

If you are a builder and would like to participate and receive the monthly report for free, request an invitation below:

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