Breaking Down the Real Numbers Behind Lumber Price Increases
Download MP3 Description:
- How Much Have Building Costs Gone Up?
- A real-world example from a dream house build and the cost increase.
- An Instagram model's experience with building their $3 million house, with some hard numbers on the price hikes.
- Timeline of the Build
- Purchased a Lakefront lot for $260,000 in 2020 to build a $3 million castle.
- Four years later, the house is still unfinished, raising questions about the project’s timeline.
- Unexpected Costs and Delays
- Extra $100,000 loan due to supply chain issues and material shortages.
- Initial lumber budget of $105,000 rose to $177,000 – a 60-70% increase.
- Appliances went from $65,000 to $78,000, which is relatively moderate compared to others in the industry.
- Other Material Costs
- Stone for architectural features increased from $27,500 to almost $40,000 due to delays and supply issues from Oklahoma quarries.
- Analyzing the Cost Breakdown
- Despite the higher costs for materials, it doesn't seem to add up to a $3 million price tag for the house.
- The lumber budget alone doesn’t explain the increase in the final cost.
- Lumber Prices and Stabilization
- Lumber prices have stabilized at around $600-620 per thousand board feet, double the cost of a few years ago.
- The market is expected to stabilize with prices ranging between $550 and $750.
- Builder's Dilemma: Spec Homes vs. Custom Builds
- Builders are hesitant to risk building speculative homes due to fluctuating markets and uncertain returns.
- Self-build projects and custom commissions are less risky but come with their own challenges.
- Lessons from a Historical Case
- Flashback to a 1980s "This Old House" project where builders lost money on a rehab, showing that building and flipping homes isn't always profitable.
- Managing Construction Costs and Time
- Be mindful of your budget and market when building, whether it's for a custom project or spec home.
- Timely completion is key to managing costs – the longer a project takes, the higher the carrying costs.
- The Impact of Delays and Fixed Costs
- Delays increase fixed costs like insurance, overhead, and executive pay, which should be considered in the overall construction budget.
- Construction Cost Rule of Thumb
- Materials and labor costs have risen by approximately 70% over the past few years.
- Always account for increases in your construction quotes to avoid being caught with a budget that's too low to complete the project.
This episode breaks down the real impact of rising construction costs and how they affect both residential and speculative homebuilding projects.
