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Homebuilders and new home buyers are getting squeezed by lumber prices

Posted: 4:51 AM, Oct 09, 2018
Updated: 2018-10-09 11:05:54-04

President Trump’s 20 percent tariffs imposed on Canadian lumber in January are hitting close to home

Homebuilders and potential new-home buyers are getting squeezed from a spike in lumber prices.

Just as the homebuilding industry is revving up, tariffs imposed on lumber imports are sending housing construction costs through the roof.

Tariffs on Canadian lumber are adding to higher costs for wood, which are fueling housing price increases.

“Tariffs overall are raising prices anywhere between five and eight dollars a square foot depending on what type of home your building and what  area. Compared to last year, overall lumber prices have gone up anywhere from 60  to 70 percent compared to last year,” said MPM Homes owner Moses Mostaghas.

The tariffs come on top of soaring property values the past five years. When a labor shortage is factored, it adds to the cost along with rising interest rates.

“It is actually pricing people out of purchasing a home,” Mostaghasi said. “Home affordability has changed over the last couple of years, and it’s only going to get worse so if you’re in the market, the time is now because in the future, prices will be higher, and interest rates will only go higher.”

The home price increases have reduced the affordability compared with other parts of the country.

“Even the home prices have overall gone up in Corpus compared to the rest of the United States. Our prices are still relatively low if you compare them to prices in California, Florida, and Washington,” Mostaghasi said. “As far as the state of Texas, our home prices are still competitive to Austin, San Antonio, Dallas, and Houston as all those places are experiencing the same things we are here in Corpus. Labor shortages, higher interest rates, and higher prices in all types of material, not just lumber.”

The rising prices hit every end of the market, and they make cost estimates very difficult.

“It is very hard to give anything more than 30-day estimates. Right now prices are changing daily, not just in lumber, but lighting, plumbing, hardware, concrete, and cable steel. Tariffs affect all these types of products,” said Mostaghasi.

The experts see a residential slow down, but do not see an end to the current South Texas boom.

“Higher interest rates and higher prices always lead to slow down soon and the overall purchase of homes whether it’s new or used,” he said. “But there are always people in need of homes, and it’s always better to own your own home than it is to rent an apartment or rent a home. Because at the end of the day, you’re creating value and putting your money into a form of a bank account which is real estate.”

So what does this mean for the consumer?

“Unfortunately, what this means is higher home prices for the consumer. And also that some consumers won’t be able to purchase a home at this time until their incomes rise,” said Mostaghasi.