The residential housing market has almost always experienced inflation from one year to the next. 2021 may be different: the price of building materials, especially lumber, has caused the cost of new homes to rise sharply in Nashville and elsewhere in the United States. This inflation has caused builders, developers and home buyers to adopt new strategies to rein in the cost of new homes.
The costs added by inflation
The percentage of new homes has risen sharply in the last few months. The historical percentage of newly constructed homes was about ten percent, but competition among home buyers has pushed the percentage to one in four.
A second factor in the inflation of prices for new homes has been a sharp rise in the price of lumber. According to a wood industry tracking firm, the price of lumber has increased by 67% this year and by 340% since 2020. This inflation is not limited to joists, rafters and under framing materials. Floor materials, cabinets, doors and windows have also experienced significant price increases.
The rise in the price of lumber was caused by more than increased demand for new homes. Lumber tariffs were already placing upward pressure on lumber prices when the covid-19 pandemic struck in early 2020. The housing industry assumed that the pandemic would reduce the demand for lumber and that prices would fall. Instead, the demand for hew houses surged, and the current inflation is the result. According to the National Association of Home Builders, the inflation has added $35,872 to the cost of an average single-family home and $12,966 to the cost of a multi-family dwelling.
Inflation in the price of other materials
Lumber is not the only building material hit by inflation. Drywall prices have risen by about 7%m and the prices of copper and steel have risen by even greater amounts. The competition for new house has also pushed up the price of buildable lots by about 11% per lot. Nashville is seeing one of the biggest drops in the availability of buildable lots.
One of the by-products of a sudden and extreme change in market conditions is an increase in contract disputes. Contract terms that were once negotiated in good faith may become burdensome and unenforceable due to the sharp increase in material prices. In such circumstances, the services of an experienced construction attorney can be an essential aid in dealing with businesses that are refusing to perform due to the unexpected increase in prices.