A "dramatic rise" in lumber prices this summer has added $700 to $1,500 to the price of the average new house, Housing and Urban Development Secretary Patricia R. Harris said yesterday.
Harris' said she has asked the administration's Council on Wage and Price Stability to look at the reasons for the sudden and unforeseen lumber price increases.
Since July 1, according to HUD survey of 500 independent builders and lumber suppliers across the nation, lumber prices have increased between 12 and 28 per cent. Since August 1, the increase ranged between 8 and 16 per cent.
The HUD field survey, said Harris, also indicated that insulation prices have risen between 5 and 15 per cent this summer, and that many suppliers predict a shortage.
The combination of these increases in home-building components and the prospect of an insulation shortage means that the median-priced house, which used to sell for $51,300, will now cost its buyer between $52,000 and $52,500, Harris said.
In the past 11 years, she said, housing costs have increased 89 per cent, while family income has risen 47 per cent.
"We've reached the point where people making $15,000 to $20,000 a year can scarcely afford to buy a house," she said, a situation she called "a crisis."
The HUD Secretary announced she is expanding the department's Task Force on Housing Costs from five to more than 40 members. The task force, made up of government, industry and other outside taxpayers, will meet in early October to prepare recommendations on lowering housing costs, she said.
Harris also released the original task force's interim report on housing costs. The 21-page report lists 80 ideas for controlling housing costs, among them recommendations to speed up the processing of construction-related environmental studies and the reviewing of loan applications.
An economist with the National Forest Products Association, which represents lumber firms, called Harris' announcement "the first step toward jawboning."
Dr. John Muench said the reason for lumber cost increases is "simply a lack of timber."
"This isn't the first time it's happened," said Muench of the recent lumber price increase. "Prices go up, homebuilders complain to the administration, investigations begin and all they show is that the industry is very competitive. Lumber is responding to a free market."
Muench said he thinks the price rise is the result of two immediate things: a high demand, due to increased housing starts this summer, and misjudgment on the part of distributors who failed to stock enough lumber to meet the demand.
"Lumber's juet like agriculture," he said. "You try to make a profit when it's good, because you remember when it was lousy a few years ago."
"And Harris can't jawbone 8,000 different companies," he said of the HUD Secretary's announcement.
A spokesman for the National Home-builders Association said there were more than 2 million housing starts in July, up from 1 1/2 million for the same month last year.
"Housing starts are up, so lumber demand is up, so prices go up," he said. "But our position is that the lumber prices shouldn't be jumping quite so much."
Lumber prices have risen 90 per cent in the last two years, according to the association, and lumber accounts for 25 per cent of the cost of building homes.
Robert Arquilla, president of the NHA, released a statement applauding Harris' request that the lumber price rise be investigated.