High lumber costs won’t cut starts or boost prices

Surging lumber prices have led to delays in housing starts and an increase in some new home prices. But, while we expect lumber prices to remain relatively high over the next couple of years, the impact on starts and house prices will not persist. Beyond the short term, higher construction costs have little bearing on house prices, with the ultimate impact being lower land prices. Accordingly, we think starts can continue to rise and house price growth to slow even as lumber prices remain high.