Record lumber prices driving up cost of housing in Spokane

Smack in the middle of a homebuilding boom in the Spokane area, contractors and home remodelers are facing record prices for lumber, which is adding more than $24,000 to the cost of an average new home.

James Morgan is the purchasing manager for Greenstone Homes, which means it his job to buy enough lumber to build from 200 to 250 new homes a year in the Spokane and Coeur d’Alene areas. He describes his job as “painful.”

“We are not talking a little bit higher. It’s almost double the highest lumber prices of previous years,” Morgan said. “It’s absolutely crazy. I can’t believe it.”

Joel White, executive director of the Spokane Home Builders Association, said contractors were paying about $365 per 1,000-board-feet of framing lumber in April. The cost-to-board feet is used to calculate how much it will cost to build a home, which often then is passed through to the homebuyer.

But in 2021, in the middle of a housing boom, contractors are paying more than $1,000 per 1,000-board-feet, White said. For the average new home, that is adding $24,000 to the price.

“It’s absurd what is going on,” White said. “It’s a supply-side issue. We don’t have enough lumber to meet the demand.”

Kurt Paras, vice president of Paras Homes, said the prices started to spike last fall. As an example, he said his company offers a simple rancher-style home plan. Lumber for the rancher home cost about $18,000 in the spring of 2020. The lumber for the same home now costs more than $36,000.

“The prices really have taken off,” said Paras, whose company typically builds 50 to 55 homes a year. “So far, nobody has backed out of a contract. We told them up front that the lumber prices are higher. So far, it’s worked.”

The prices prompted John C. Fowke, the chairman of the National Association of Home Builders, to send a letter to President Joe Biden on Jan. 29 alerting Biden to the “magnitude” of the problem.

Fowke said the rising lumber prices “could hurt the housing sector and the economy.”

“The NAHB believes the White House can play a constructive role in mitigating this growing threat … by urging domestic lumber producers to ramp up production to ease growing shortages and make it a priority to work with Canada on a new softwood lumber agreement,” Fowke wrote.

White said he would prefer local lumber producers meet the demand, but tariffs are preventing Canadian producers from shipping lumber across the border. Right now, White said he doesn’t know why local mills can’t keep up with the demand. He said he’s open to any idea that could provide more lumber.

“Whether multifamily homes or rentals, we are just trying to provide housing at an attainable level,” White said.

In his letter to Biden, Fowke noted the cost of “oriented strand board,” which includes particle board and plywood, has gone up at even a higher rate, some 235% since last year.

“These sharp increases are unsustainable, particularly in light of a continued housing affordability crisis,” Fowke wrote. “Housing’s potential to lead the economy forward is limited as long as lumber remains expensive and scarce.”

White said he’s had to counsel local contractors to ensure that they include escalator clauses in contracts for new homes to cover the increase in prices. Otherwise, contractors could end up losing money when building homes.

“It’s not just the wealthy builders. It’s hitting the average homebuilders,” White said. “It’s also hitting Habitat for Humanity and the Spokane Low Income Housing Consortium. They all are being impacted by these costs.”

Energy regulations

In addition to increasing lumber prices, homebuilders also are now operating under new energy regulations from the state of Washington that kicked in on Feb. 1. Contractors can decide how to meet the new energy regulations using different methods, such as adding more efficient appliances.

As part of the new regulations, Greenstone began adding solar panels to all its new homes in the Spokane and Coeur d’Alene area, Morgan said.

“It’s adding to the cost of homes,” he said.

White said existing-home owners in the area are reaping the benefits of the housing boom as increasing home prices have added billions of dollars worth of equity.

“But if you are trying to get into a new home, it’s not a good situation,” he said.

In addition to record-high lumber prices, Morgan said the lumber he does find is often not very good.

“The quality of the material is getting worse,” he said. “There is not as much to pick from. You have to take what you can get.”

Thomas Clouse can be reached at tomc@spokesman.com or at (509) 953-0561

“It’s not just the wealthy builders. It’s hitting the average homebuilders. It’s also hitting Habitat for Humanity and the Spokane Low Income Housing Consortium.” Joel White Executive director of the Spokane Home Builders Association