Add one more factor to the rise in prices for new apartments in Seattle. Rising timber prices.
Timber prices have tripled in the past year. That can add tens of thousands of dollars to a new home or townhouse wine.
In the Seattle hotspot market, developers say single home buyers are still willing to pay. The math is more complicated for affordable apartment buildings. Rents in the city fell a year after the epidemic. Limited funding for affordable housing is squeezing those budgets.
Non-profit developer Bellwether Housing, which plans to build an 186-unit residential complex in the Rainier Valley, expected the frame timber to cost $ 1.49 million in December. Now it has increased by $ 850,000, which is a 57% increase in timber costs, says Richard Loon, director of real estate development at Bellueter.
At the other end of the housing price spectrum. In the Terrene Homes division just outside of Kirkland, where new homes cost $ 2 million, wood costs add $ 40,000- $ 50,000 to the price of each home.
In the process, during the development of 11 townhouses in Bottle, timber prices have doubled since construction began in October 2020, when framing began, said Cameron McKinnon, director of development and acquisition at Gamut360 Holdings. This adds up to $ 30,000 $ 10% of the total project budget for each home, which is mostly wood-fired.
So the reason for the rise in house prices in Seattle is the rise in wood prices. Not exactly. Few of the five houses for sale in the metro area are newly built. Record high apartment prices here are due to low supply of houses, a similar trend is observed in all cities of the country.
“If it were not for the materials, it would be in another traffic jam, because the demand is very high. It is quite impossible to meet the demand, “said Daryl Fairweiser, chief economist at Redfin.
But budgets for new construction are now full of questions.
Builders say other materials are also more expensive or harder to find, from steel to siding to insulation.
“We’ve never seen anything like it before,” said McKinnon, who is the first vice-president of the King ոհ Snohomish Master Builders Council.
And if costs continue to rise, new homes may be unavailable, especially in more affordable areas outside Seattle.
“Construction may have been a potential relief valve,” said Ill Illou economist FF Tacker. “It narrows that relief valve.”
The recent rise in timber prices comes amid rising prices for other commodities such as gasoline, raising concerns that inflation could jeopardize the country’s economic recovery.
The storm of factors raises the price of timber.
At the beginning of the epidemic, the mills were temporarily closed, following the shutdown orders, and pursuing an economic downturn. According to one estimate, the production capacity of softwood has decreased by almost 16% in the first quarter of 2020.
“The epidemic started, we thought, ‘Oh, my goodness, here’s a big drop,'” said Steve Ika, CEO of Hampton Lumber, which has three mills in Washington and sells timber in Oregon, British Columbia. to distributors. և Home centers.
Hampton closed the mill for only about a week, but the others paused longer, anxious demand could fall, says ika ika.
Instead, demand has grown sharply, both among homeowners who want to transform and among home builders. This March, US housing construction was 37% higher than last year.
Add to that long-standing supply chain problems, such as mills that have stopped production or shut down during the Great Depression, the destruction of the pine forest beetle, and a shortage of workers, including truck drivers.
“For now it is just a classic. There is a huge demand for timber,” said ika ika.
Due to environmental issues, the harvest of timber in state-controlled lands in Washington is declining, but more supplies may come from the southern United States and Europe. Hampton is building another sawmill in British Columbia.
Increased supply may eventually bring prices back, says ika ika. “Ultimately, I expect supply and demand to be balanced. “Nobody really knows whether it lasted three months, six months or two or three years.”
Buyers are still willing to pay in the hottest areas of the local single-family home market.
With $ 2 million for the Kirkland home, even with rising timber prices, “we have multiple supply situations for individual homes,” said Warren Metz, a partner at Terrene Homes.
“There was a demand so far,” McKinnon said. “That demand has pushed up apartment prices to cover the cost overrun, but that only works if there is demand.”
The equation is different for apartment buildings. During the epidemic, rents in Seattle went down as some tenants went further to save money or get more space.
Affordable housing for developers who limit rent on the basis of income, the margin for additional costs is small.
Costs increase for Bellwether as costs increase.
After the epidemic, the commercial organization started construction on three projects last year. One, the high-rise, did not affect timber prices. For the other two, contractors absorbed some or all of the added cost using their emergency, in one case Bellwether had to pay about one-third of the value added. Belvetter now covers the cost of the Rainier Valley project.
To cover the gap, the nonprofit is reviewing project changes or assisting its lender. If that doesn’t work, Belvetter may be asking for more money from government funders, such as the City Housing Office.
“Looking further, ‘it’s hard to plan,'” Lu said. “How much trust do we need?” Are we going to overpay if we close our timber prices now? ”
Market rates for apartments can be cut short.
Marpac Construction’s customers have so far suspended three projects at market interest rates, about a third of the total contractor projects, says partner Sai Chaleunphonh.
The company’s affordable housing projects are still in progress, but wood, concrete, steel and other supplies are adding new costs.
“If it was just wood, it would not be a big expense,” said Chaleunfo. Add the remaining expenses և “it becomes a 15% increase”.
Transformers are also seeing price increases
Homeowners working on remodeling projects also saw price increases during the epidemic.
“Customers are obviously shocked,” said Mike Dunn, CEO of Dunn Lumber, which operates building materials stores across the region, “but surprisingly, few are leaving the projects.”
The prices of similar products for 2x4s have tripled compared to a year ago. He said the price of the oriented board is about eight times higher than a year ago. (OSB is a combination of wood և resin that looks like particleboard or plywood.)
“We do not have to ask people for a price and then leave the store. They growl, they usually go and do it.”
“This is my 50th year in the industry,” Dan said. “I have never seen a market like this … It’s just amazing.”
For home builders, a timber supplier can usually offer a price to stay true to for 30 or 45 days, McKinnon said.
“When there really was a commotion in late 2020, we were getting offers from timber suppliers who said, ‘This is good for three days.’
To compensate for the rising costs, developers can change the way things are done.
Designed for the Capitol Hill apartment building, Cascade Built developer Sloan Ritchie said his company is exploring other construction methods – materials such as cross-section timber – prefabricated steel panels – to see how costs compare to timber. “All the options are on the table,” Richie said.
“We try to be creative and innovative, but we do not stop developing or stop construction,” he said.
At another Walsh Construction plant. “We are watching. Are we moving on to concrete? Are we switching to metal? ” said CEO Elizabeth Reinhart. “Is there a way to use less wood?”