Impact of Wood and Lumber Prices on New Home Costs
Wood products, including framing lumber, plywood, OSB, particleboard, fiberboard, shakes, and shingles, account for a significant portion of a new home’s material costs. According to Home Innovation Research Labs, an average single-family home requires over 2,200 square feet of softwood plywood, 6,800 square feet of OSB, and approximately 15,000 board feet of framing lumber. Softwood lumber also plays a key role in manufactured components like cabinets, windows, doors, and trusses. These materials are subject to manufacturer markups, calculated as the percent difference between receipts and cost of goods in the wood product manufacturing industry, based on IRS data, which further elevates costs before reaching the construction site.
The final price of a new home is driven higher by additional factors such as interest on construction loans, brokers’ fees, and margins needed to secure financing and underwrite loans. Per the National Association of Home Builders’ study on regulatory costs, items used during construction can increase the home’s final price by nearly 15% above the builder’s cost. Consequently, fluctuations in softwood lumber prices directly influence home affordability, compounding challenges posed by rising construction wages and higher interest rates, contributing to the housing market’s ongoing affordability crisis (NAHB, 2025).
Housing Market
The U.S. housing market in 2025 faces a complex landscape shaped by affordability challenges, high mortgage rates, and economic uncertainties. Experts from Fastmarkets highlight that persistent high mortgage rates and rising material costs are dampening builder confidence, despite pockets of strong demand. Affordability pressures are intensified by tariffs impacting the construction supply chain, adding near-term risks and increasing costs by an estimated $10,900 per home. Demographic shifts, such as a surge in immigration and a growing number of young adults living with parents due to cultural shifts and high housing costs, continue to drive shelter demand but strain affordability. New construction is expected to remain subdued through 2025, with a projected rebound in 2026 as mortgage rates ease and tariff-related uncertainties stabilize, potentially leading to an 8% increase in housing starts in 2026 and 6-7% in 2027.
Looking ahead, the housing market is poised for modest growth in wood product demand, driven by a slight uptick in housing starts and repair and remodeling (R&R) activity, forecasted to grow by 4% and 1%, respectively, in 2025. Despite a cooling labor market and policy uncertainties, the Federal Reserve’s anticipated rate cuts in 2025 could spur construction, particularly in single-family homes, with an estimated 1.5 million units, including 1.1 million single-family starts. Regional variations and supply chain dynamics, particularly in lumber and timber markets, will play a critical role, with timber prices expected to rise due to tightening supplies outside the U.S. South. However, the market remains competitive, with no imminent crash expected due to robust lending standards and sustained demand, though affordability will continue to challenge first-time buyers (FastMarkets, 2025).
