Dramatic Upsurge Of Lumber Prices Will Impact Builders And Buyers For Months Ahead
As wood costs hit sensational highs the previous Spring, homebuilders and engineers paused their breathing, with many picking to postpone development on new ventures until costs lessened. The crazy ride costs hit both enormous public passage level manufacturers and custom extravagance home designers expanding on theory. Timber costs have since returned to earth—concurring to Fortune, amble costs have fallen 68% in the wake of hitting a memorable high in May of $1,515 per thousand board feet of wood to a new cost of $485 per thousand board feet—yet manufacturers aren’t anticipating an exceptional market rectification.
Yaron Yehoda has constructed extravagance homes around Los Angeles since 2009, remembering projects for high-dollar ZIP Codes in Pacific Palisades, Encino, Studio City, Brentwood, Beverly Hills and West Hollywood. “Indeed, costs have fallen. However, you need to take a gander at the immense cost they’ve descended from,” reasons Yehoda, whose building style is “conventional with nearby components.” The value focuses for those homes have gone from $4 million to $10 million.
Looking at profit margins, Yehoda explains why some spec builders are in a holding pattern. “Those who build homes for $4 million and under are not building right now. Those high lumber prices impact the margins on that priced home. In the $14 million-$20 million range, it won’t have as much of an impact on profits.” According to Yehoda, those extra budgeted dollars spent for lumber will turn a $4-million spec home into a $4.5-million property. “Areas like Beverlywood, Beverly Grove, and around Melrose don’t command that price,” he explains.
Richard Hirsch, founder of Los Angeles-based fine wood flooring manufacturer Richard Marshall Fine Flooring, knows the wood business well. For over 25 years, Hirsch has been creating and crafting luxury solid wood flooring for homes, estates, five-star hotels and resorts around the country.
“We did more business first half of this year than all of last year. We are getting business that we won’t work on for a year or two, Hirsch said. “We have contingencies with clients if prices go up; we are allowed to pass that on. It’s all about supply and demand since the cost of the trees hasn’t gone up,” he adds.
Chief Economist at realtor.com Danielle Hale lends perspective on the situation. “I know the major builders have consistently been trying to manage their pipelines, making sure they pencil out a year from now when homes are finished based on the high lumber prices they were paying in the Spring. I’m sure that funnels down to the luxury spec builder,” Hale said.
“It’s very tricky for the builder in that $4-million range around Los Angeles because when a house must hit that $4.5-million price, buyers start to compare it to an area that’s a slightly better,” Yehoda observes.
Once again, lumber prices may rise and fall, yet spec building and real estate fundamentals remain. “It’s a location-driven market,” said Yehoda who has a new project coming to market in the next month in Beverly Hills. Marc Noah of Beverly Hills-based brokerage Hilton & Hyland is the exclusive listing agent for the property.