Homebuilders cautious despite lower lumber prices

By Charles Christian

Although lumber prices have dropped noticeably since the COVID-19 pandemic, local builders and consumers are still cautious about building new homes in St. Joseph.

Scott Laderoute, owner of Sprint Lumber in St. Joseph, said that even though the prices are not as low as before the pandemic, prices for lumber have stabilized. Business Insider states that lumber prices are down over 16% since the pandemic. However, he said other factors are still causing builders and buyers to proceed with caution.

“The current interest rates have lessened demand, even though prices has dropped substantially,” Laderoute said.

The average 30-year fixed mortgage rates, though down since the end of the pandemic, are still hovering around 7.7%. Fifteen-year rates are just over 6.5%. Before the pandemic, it was not uncommon for those rates to be in the 3% to 5% range.

Longtime local builder Tim Knapp said that this has affected both the eagerness of potential buyers, as well as the way builders now bid most jobs.

“There’s not going to be very many builders that are going to give you a locked price these days,” Knapp said. “Now we will usually try to buy supplies early, if we see potential volatility. Most lumberyards and suppliers will lock in a price for us for at least a few months.”

The savings of pre-buying the lumber can be passed along to the customer. Otherwise, Knapp said, both the builder and the buyer are forced to ride the wave and hope for further stability by the completion of the build.

Although national data suggests that lumber prices are projected to stabilize further over the next four to five years, Knapp said that occasional price spikes for certain types of wood can still cause short-term instability and unease among builders and buyers.

“For instance, right now we are seeing a spike in panel goods and in certain kinds of wafer board,” Knapp said. “These are the kinds of materials we often use in flooring and in roofs.”

This means that even though overall lumber prices used in much of home building may be reasonably priced, spikes in products that are used in every build can still cause bids to come in a bit higher than expected for a new home.

Both Laderoute and Knapp believe the continuing stability of lumber prices is positive both for builders and for consumers. However, both also said that everyone involved in the homebuilding process will breathe easier when interest rates start to drop. It is interest rates paired with stabilizing materials pricing that will lead to a noticeable uptick in the new home market in the long run.