SUBSCRIBE NOW Get a year of news PLUS a gift box!

ADVERTISEMENT

ADVERTISEMENT

Spiking lumber, steel costs driving up the price tag for home builders and buyers

Rising commodity prices have resulted in five-digit price increases for buyers, Kim Hochhalter of the Home Builders Association of Fargo-Moorhead said.

033121.B.FF.HOUSES.03.jpg
New home construction continues at a steady pace in south Fargo near Fargo Davies High School. David Samson / The Forum
We are part of The Trust Project.

FARGO — Those looking to build their dream home in the Fargo-Moorhead area have seen costs rise considerably since the onset of the COVID-19 pandemic.

Kim Hochhalter, the vice president of Building Concepts and the president of the Home Builders Association of Fargo-Moorhead, said it isn’t uncommon for home builders to incur a five-digit increase in the cost of a home. “We’re seeing an increase on an average home to be between $20,000 and $30,000 to the person that is building the house,” Hochhalter said.

Driving the dramatic spike is a nightmarish combination of events, chief among those being the pandemic.

Beyond COVID-19, though, a variety of other market factors have come into play. For one — despite the pandemic — the number of people interested in building a home “took (suppliers) by surprise,” Hochhalter said, leading to a squeeze on supplies.

Politics and weather have also had a hand in the rocky home-building market,

ADVERTISEMENT

Tariffs on Canadian-imported lumber have driven up costs for American home builders, Hochhalter said. Meanwhile, wildfires in California and Oregon as well as the recent freezing temperatures in Texas had a two-fold impact: increasing the number of homes needing to be built and razing domestic timber supply.

“With the fires in California and Oregon and the devastating things that happened in Texas recently, they’re anticipating a need for more materials,” Hochhalter noted. The timber lost in the West Coast fires could have built one million homes, she said.

033121.B.FF.HOUSES.01.jpg
Though skyrocketing commodity prices have made home building a more expensive proposition, houses are still in progress in south Fargo near Fargo Davies High School. David Samson / The Forum

Lumber has seen the greatest cost increase since the onset of COVID-19. According to the National Association of Home Builders , lumber prices have risen 180% since last spring. Lumber futures contracts ( NYSE:LBS ) opened 2020 just north of $400 but closed at $952.60 Friday, March 26.

Given the volatility of the market, lumber yards can only guarantee prices for three days as opposed to 30 days as is typical, Hochhalter remarked.

Steel costs have also fluctuated significantly. “We were pricing out a house the other day that they couldn’t give us a steel price until the next couple of days because they knew they were going to be getting a price increase,” Hochhalter said. “We’re seeing things like that as we’re pricing out units for our clients.”

Overall, Hochhalter said that the complex convergence of market conditions means there are “too many factors” to pinpoint when costs will return to normal. As a result, home builders in the area are working with clients to blunt the impact of unstable commodity prices, either by modifying plans or holding off on construction to see if market conditions improve.

ADVERTISEMENT

033121.B.FF.HOUSES.02.jpg
Residential areas, such as this one near Fargo Davies High School, are growing quickly despite this past year's sharp rise in commodity prices. David Samson / The Forum

This year, Hochhalter is also anticipating that home construction may take longer than usual. “Between the number of homes being built and our subcontractors being able to handle the increase in homes…we’re anticipating adding an additional four weeks onto our new construction that normally we wouldn't,” she commented.

The convergence of market factors nationwide has made for an unsteady home-building market in the F-M area, but Hochhalter believes the situation will improve as lumber yards catch up with demand and Canadian lumber prices fall. “It all affects each other, but I do believe that there is a silver lining down the road,” she said.

With interest rates “staying down,” Hochhalter added that residents are still opting to build and the housing market in the metro area remains robust, even if demand is presently outpacing supply.

“It’s still a good time to build in our area, that’s for sure.” she said.

Related Topics: REAL ESTATEFARGOREAL ESTATE
Thomas Evanella is a reporter for The Forum. He's worked for The Forum for over two years, primarily reporting on business news. Reach him at tevanella@forumcomm.com or by calling 701-353-8363. Follow him on Twitter @ThomasEvanella.
What to read next
One hundred employers representing a variety of industries are expected to participate.
Bankruptcy filings from the past week in all of North Dakota and Becker, Clay, Douglas, Grant, Hubbard, Mahnomen, Norman, Otter Tail, Polk, Traverse, Wadena and Wilkin counties in Minnesota.
As the Fargo Marathon makes its return to the spring calendar, the event is expected to account for millions of dollars in direct visitor spending for the city. Kali Mork of the F-M Convention and Visitors Bureau figured the races could bring in between $1.4 million and $2.5 million.
Nautical Bowls, which features 10 signature acai and superfood bowls in addition to a build-your-own option, is opening at 11 a.m., Saturday, May 14, in West Fargo. “We’re ready to rock and roll,” local franchisee Kim Scott said.