If you're looking to buy a home in early 2021, you'll be hearing that pricing will be increasing for most home builders. There's lots of factors at play that force home builders to increase prices related to the commodity market, continued COVID-19 restrictions around work place safety and lacking of inventory.
Lumber increases have effects all over North America, in a broad range of industries.
Lumber itself is traded as a commodity, similar to gold, silver and oil. It's subject the normal rules of supply and demand, that result in the prices set. Typically, normal increases and decreases are all part of the process and we can manage the costs without having to change our own. At this time last year (February 2020) the price of lumber was less than half of what it currently is.
As a business, an increase of 50% of costs to a major component of what we do requires us to increase the price.
A few driving factors are that 2020 saw COVID-19 effect economies and many lumber mills had to decide to either continue at current levels of production or reduce output. Most chose to reduce output anticipating a slow down in demand.
Here's a few articles that detail the increases even more so.
Thinking of a new wooden deck for spring? It may bust your budget - CNBC
Demand, Lockdowns Make Wood Shortages Likely In 2021 - Seeking Alpha
Low interest rate environment drives surge in demand throughout North America.
As the effects of COVID-19 continue on our economy, national banks are trying to stimulate investment and drive growth with access to lower costing debt. This is a typical tactic that many have used before, but a possible reason that it's seeing a drastic effect on real estate is the fact that many are stuck at home, and are realizing they want a change. In markets outside of Edmonton, some larger municipalities are seeing a surge of people moving from urban centers to suburbs. Places like Toronto and Vancouver are seeing lower demand for condos in the downtown areas, and higher demands further out as the work from home trend continues.
The work from home trend, having your home as a place where you're spending more and more time combined with low interest rates available is driving demand nationally.
For us here in Edmonton, that means we're competing with increased demand for materials and prices increasing with that trend.
Here's a few more articles that detail what's happening.
Pandemic-shift: spike in savings diverted into housing driving national median home prices up 8.6%, according to Royal LePage
Millennials eager to jump into housing market amid low rates: Survey
What does that mean for those looking to purchase a new home? Here's our opinion on the situation.
As we've been building houses for many years, we're part of the industry and are subject to the ups and downs faced nationally. Many of these factors are outside the control of Kanvi, and we're in a situation where reviewing our pricing to ensure value for our clients is retained while we can continue to service our clients for the long term. This means, for us, that prices will be increasing as we continue to build homes. If you're at a point considering a new home, the low interest rates available, the lack of available homes and the increase in commodity pricing is something that's not going away anytime soon as far as we can tell.
If you'd like to discuss this in more detail, and see some of the increases we're getting from our suppliers feel free to contact us.