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Why is Lumber So Expensive?

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Hope all is well and you are enjoying some semblance of return to normalcy with California reopening.  For a great primer on what that means, the Mercury News put out a helpful FAQ.
Market Update
From a macro perspective we’ve seen home prices continue to hold with the greatest increases in the single family home market.  Many clients/friends have asked if this rise in housing prices can be sustained.  For an answer, we thought it might be useful to look at the costs to build.  The thought being that the more that costs for home building rise, the more new homes and existing homes cost.
Lumber Increases
Anecdotally, many have head that lumber prices have gone up during the pandemic (along with rental cars, boba, toilet paper, and microchips).  Over the past year, the price of lumber in the US has gone up by as much as 377%.
Wood that typically sells for $200-$300 per 1k feet hit nearly $1.7k in early May.  This jump adds ~10% to the average price of a new single-family home in the bay area.
Reasons for Lumber Increases
Problems in the lumber market started long before the pandemic as the years following the Great Recession (2007-2009) led to a dramatic decrease in home building as new housing starts ground to a halt.
As a result, US lumber demand plummeted by 49% and 30+ large sawmills went out of business.  At the same time, Canada, which typically provides 1/3 of the US lumber supply was hit by the perfect storm of unfortunate events including an infestation of bark-eating beetles killing 60% of British Columbia’s salable pine and wildfires in 2017 and 2018 destroying another 6.2m acres of would-be lumber.
When the pandemic struck in 2020, many initially assumed that the housing pullback of the Great Recession would repeat itself.  By April 2020, sawmill operators had cut back output capacity by 40%.  However, something strange happened, demand for lumber didn’t go down but went up!
Record low home interest rates, stimulus cash, and more time at home led to a boom in remodels and new construction ratcheting up lumber demand.
What’s Next?
Although no one is sure how long the lumber shortage may last, lumber futures are showing a downward trend as high lumber prices have turned normal business lumber buyers into sellers and factories scramble to ramp up production.
Hope you and your loved ones are managing well and as always, feel free to contact us with any questions, real estate related or otherwise.
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Find Your Home

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Finding your home starts with arming yourself with knowledge. As highly educated professionals local professionals, we’ve taken time to thoroughly research, detail, and explain the nuances of the different neighborhoods in our areas.

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Home Buying Process

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The first step in finding a home is to select the right neighborhood. Becoming a home owner has many legal and financial ramifications. It may not be prudent to choose an agent on “personal connection” or because an agent is “nice”. Just like lawyers and doctors, the best agents are equipped with specific knowledge of the area and understands the legal consequences of contract documents.

As an attorney who grew up in the area, Kevin understands and explains the repercussions and ramifications of all contract documents. From contingencies to liquidated damages, Kevin walks buyers through the nuances and meaning of all parts of the offer process. While no agent is right for everyone, Kevin believes that experience, expertise, education, and specialization all contribute to success.

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What You Should Know Before Buying A Home

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What should I know before buying a condo or townhome?

Purchasing a condo or townhouse typically means ownership in what is known as a common interest development (“CID”). When a buyer purchases a unit in a CID, the buyer is either purchasing a pro-rata (fancy word for proportionate) share of the common areas of a complex or the buyer has an interest in a homeowner’s association that owns the common area.
In either scenario, this usually means that the buyer will be required to make monthly payments, also known as regular assessments or homeowner’s association dues, to pay for maintenance of the common areas. But what happens if a complex or community suddenly needs to replace a damaged roof from an unexpected storm or update an aging fitness center? These types of unexpected expenses may call for special assessments. Special assessments are funds in addition to regular assessments that an association finds is necessary to address special or unexpected repairs or additions for a complex.
CID’s also may have special rules and regulations like architectural requirements, limitations on pets, and age restrictions (ie. senior housing).

What does buying a condo or townhome mean?

Part of the appeal of buying a condo or townhome is the ease of maintenance for upkeep of the home. The fact that an association maintains and cares for landscaping and exterior features means less hassle and worry for an owner. However, this convenience also means that an owner must follow certain rules, and violation of rules can lead to violation notices or possible fines from an association. As you can imagine, failure or improper disclosure of important information related to a homeowners association can lead to conflicts, and potentially litigation, between a seller and buyer. Thus it is important that a seller fully disclose all necessary documents related to ownership in a CID. In addition to regular disclosures that are legally required in residential transactions, California resale of a unit in a CID requires additional disclosures including:

1. Copies of all governing documents of the development:
2. A statement describing restrictions in governing documents limiting the occupancy, residency, or use on the basis of age;
3. A copy of the most recently distributed annual budget report;
4. A statement from the association regarding the associations current regular and special assessments and fees as well as any assessments or fees specific to a unit that has not been paid;
5. A statement of any notice previously sent to a seller related to any alleged violations of rules that have yet to be resolved;
6. Whether there is any current litigation between the builder of the complex and a homeowner’s association with a copy of any alleged defects;
7. Any settlement agreement between a builder of a complex and the homeowner’s association including a description of any defects the association believes to be present and when such defects will be replaced;
8. Any change in a homeowner’s associations current regular and special assessments and fees which have been approved that have yet to become due and payable;
9. Any provisions in governing documents that prohibit the rental or leasing of units including a description of the restriction and how it applies;
10. A copy of homeowner’s association board minutes conducted over the past 12 months if requested by a prospective buyer.
There are many benefits to owning a condo or townhome including ease of ownership, uniformity in design, and affordability. Some find a sense of comfort in knowing that they can rely and count on a group of other people to share in what may be increased costs due to unexpected events. However, this comfort also calls for increased diligence when either selling or purchasing a unit.