Even before the hurricanes ravaged parts of Texas and Florida, lumber prices were on the increase. But with the anticipated rebuilding demand, wildfire ravaged British Columbia and Montana, and U.S duties on Canadian lumber, we can expect some impactful increases in the input costs for lumber. Bloomberg notes that Chicago Mercantile Exchange softwood lumber prices have been driven to the fifth-highest peak since 1986. On recent bids for projects were are involved with, we are also seeing increased input costs in addition to an already labor constrained market. Labor concerns are not just a local issue, as Wall Street research firms are noting widespread shortages across major housing markets. The main question going forward is can we expect lower margins in homebuilding or can some of the input costs be passed on as higher prices? If inventory remains low, high quality areas are likely to see sale price increases. Nevertheless, on land acquisition, we expect underwriting to embed much higher construction costs into the residual model.

 

Source:

https://www.bloomberg.com/news/articles/2017-10-19/building-or-purchasing-a-u-s-home-it-s-getting-even-pricier