Remember how when prices were going up, up, up, one of the reasons it was allegedly justified was “high construction costs”? See this post for a lengthy example of a local real estate professional making that argument. Well, luckily for us, it would seem that construction costs are dropping like a rock. Or, perhaps not so luckily…
A slump in the housing market and low lumber prices have resulted in shutdowns at 18 sawmills in the Pacific Northwest, industry experts say.
All told, [Analyst Claudia Shank Hueston of JP Morgan] said, 18 mills in the region are being shut down for varying periods, including indefinite closures of Hampton Lumber operations in Morton and Willamina, Ore., Seneca in Eugene, Ore., and Rosboro Lumber in Vaughn, Ore.
With homebuilding drastically reduced, lumber prices fell to $238 per 1,000 board feet at the start of the month, 15.6 percent lower than a year ago, according to the trade publication Random Lengths.
Obviously it would take a while for lower material costs to be reflected in completed construction, but if material costs are dropping 15 percent per year, doesn’t it follow that the price of new construction homes will soon be dropping as well?
(Associated Press, Seattle P-I, 02.05.2008)