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Skyrocketing Lumber Prices Hit California New Home Buyers Hard

KENTFIELD (KPIX) -- Lumber prices have hit historic levels and they're making homes in California even more expensive, builders say it's causing a ripple effect that will price more people out.

For those who were lucky enough to shelter in place in a home they own this past year, 2020 gave them time for DIY projects.

"People were sitting home for a year, looking at their old house. They get tired of that and they start thinking of building a home office," said Denny Kasten, president of Kasten Builders.

Kasten says this is the busiest his building company has been in a lifelong career. People are adding decks, renovating their homes or building something brand new from the ground up. When Kasten saw the current price of lumber for such projects he was stunned.

"I keep thinking we got the numbers wrong because that's really astonishing to me," Kasten said.

Lumber prices have more than doubled since this time last year. There are several factors at play.

First, environmental regulations on lumber mills in the United States have led to closures in recent years. The mills that were still operating stopped production around the start of the pandemic so builders began to buy from Canada where then-president Trump had put in place a 20-plus percent tariff on soft lumber. Restricted supply and increased demand during the pandemic pushed prices up to historic levels.

"This is a new record for us," said Dan Dunmoyer, president and CEO of the California Building Industry Association.

Dunmoyer says this problem on average is adding about $24,000 to the cost of building a home.

"Each thousand dollars in added cost prices out 12,300 families from being able to buy a home in California so, when you add $24,000, you're talking about pricing out hundreds of thousands of Californians," Dunmoyer explained.

The restricted supply is also slowing down production, which can put projects on pause.

"If they start running out of a certain material and they're on back order, then you have got to lay your guys off and then you're afraid that somebody else is going to hire them because people are at a premium," Kasten said.

"There's just no relief in sight at this time," Dunmoyer said.

Builders across the country say relief can't come soon enough. President Trump dropped tariffs to 9 percent on Canadian lumber in December but they say it hasn't yet made a big difference.

"Lumber impacts everything we build both to sell as well as just to rent and that's something that we hope the White House would step in on to create that trade incentive with Canada and other countries and help create the supply to push the price down," Dunmoyer said.

Builders say lumber usually accounts for 20 percent of the cost of a project. The additional $24,000 Dunmoyer mentioned is a figure based on an average U.S., 4-bedroom house. Depending on where you're building in the Bay Area, it can easily mean adding more like $70,000 to $80,000 to the price tag.

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