Finally a bit of good news in the midst of all the 2020 chaos! The United States and Canada have, after much deliberation, reached an agreement to normalize the price of softwood lumber shipments by reducing tariffs coming from Canada. This positive development has been lauded by the home building industry which currently is experiencing an unprecedented upswing in new construction.
These reductions come after a decades-long dispute between U.S. and Canadian lumber producers centering on Canadian timber pricing policies. In 2017 industry leaders began urging the two countries to begin negotiations after tariffs of over 20 percent were imposed. While definitely a positive step by the United States Commerce Department to reduce duties from 20 percent to 9 percent on Canadian lumber shipments, the National Association of Home Builders (NAHB) believes more will need to be done in order for residential housing construction to advance during the coming years. Chuck Fowke, NAHB Chairman said, “The Commerce Department’s action to reduce duties on softwood lumber from Canada into the U.S. is a positive development, but more needs to be done. Tariffs have contributed to unprecedented price volatility in the lumber market in 2020, leading to upward pressure on prices and harming housing affordability for American consumers. The U.S. needs to work with Canada to end the tariffs and achieve a long-term, stable solution in lumber trade that provides for a consistent and fairly priced supply of lumber.”
The current booming period for the homebuilding industry has been hampered but not defeated by the increasing lumber prices, but in order to eventually find stability, these tariffs are going to have to be reduced even further. In July, 2020 lumber prices were over $500 per thousand board feet. In mid-September they reached the historic price of $950 per thousand board feet. While the tariff reductions along with other factors, have created a drop in current lumber prices, overall they are still 60 percent higher than in April, 2020.
Research commissioned by the NAHB has determined higher lumber prices have increased the cost a new single family home by an average of $16,148 even with the new tariff reductions. While lower interest rates have been able to offset some of the cost, homeowners shouldn’t be put in a position of losing the overall savings of interest money in order to compensate for higher lumber costs.
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