If you feel like everything in the real estate and construction market is really expensive, it’s not your imagination. In April, The Tennessean reported Nashville real estate prices were 13 percent higher than a year earlier. Meanwhile, lumber prices are at record highs. A Nashville lumber yard recently circulated a letter citing research that says the cost of framing a 2,000-square-foot house with a garage is double the cost of a year ago.
I suppose you could blame Canada, which is tempting, after this week’s hockey play-off results. But the real culprits are Supply and Demand.
You don’t have be Smoot or Hawley (the grim Depression-era legislators pictured here) to know that when the U.S. raises tariffs on foreign imports, foreign firms redirect their goods away from the U.S. to other markets. How’s that for a sharp stick in the eye?
Speaking of sharp sticks, if you wanted to buy one made of Canadian spruce, the price could be about 50 percent higher than it was 18 months ago. Because Canadians are shipping spruce elsewhere to avoid our tariffs. This means that sharp spruce sticks–or, more importantly, blunt spruce 2×4’s–are in tighter supply.
And what happens when supply decreases and demand increases? Prices rise.
Demand for lumber and other construction materials is indeed increasing in Nashville as demand for real estate and housing is skyrocketing. In fact, I was recently doing some construction on a house and needed a security key box to leave on the job site. I drove to the nearest hardware store and described what I was looking for. I was still making the hand gestures to signify punching numbers into a keypad, when the owner started laughing.
“Ma’am, I sold my last four of those things today,” he said, pointing to the empty hook where the security locks normally hang. “The real estate market here is crazy. We just can’t keep up.”