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Skyrocketing lumber prices drive up homebuilding costs in Washington

The cost of lumber has gone up 188% since the beginning of the pandemic, which raises the cost of new builds and could price out some homebuyers.

SKAGIT COUNTY, Wash. — Anyone buying lumber these days is in for sticker shock. Prices are at unprecedented levels, and it's affecting everyone from people planning home construction projects to home builders, like Landed Gentry Homes.

The Skagit Valley home builder has never seen lumber prices skyrocket like this before.

The price of lumber has gone up 188% since the beginning of the pandemic, adding at least $24,000 to the price of a new single-family home, according to the National Association of Home Builders.

"There were a few instances where we did not make a profit on the house," said Kendra Decker, who handles sales and marketing with Landed Gentry.

RELATED: Existing US home sales fell in February, while prices rose

Landed Gentry is building about 60 homes in a new development in Sedro-Woolley called "Cambridge Commons." They are no longer doing pre-sales on homes in that neighborhood because prices have increased so dramatically between the purchase and sale agreement on a home and when it is delivered to the customer in four to six months.

"That timeframe – that can be huge with prices going up that rapidly," said Brian Gentry, president and principal of Landed Gentry. "That can be a giant squeeze on our margin of the company."

Landed Gentry has switched their business model to selling move-in ready or quick delivery homes.

"So what we do is we have lot holds and lot reservations," said Decker. "Once we're close enough to completion, we can release them for sale."

So what's driving prices up? Lumber mills pulled back on production at the beginning of the pandemic and now they're trying to make up for it. But that's not the only reason.

"We've had lumber tariffs that have happened over the last several years, you know for Canadian lumber, and that's affected lumber prices in the U.S.," said Gentry. "We've had several mills that have shut down in the last three or four years, and so there's just less supply coming to the system."

Tight supply and unexpected demand for housing could price some people out of buying a home.

"It breaks my heart to think that some people may not be able to buy the home they thought they could," said Decker.

RELATED: How the COVID-19 vaccine could fuel Seattle's hot real estate market

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