When timber prices hit dramatic highs last spring, home builders and developers held their breath, and many decided to postpone building new projects until prices subsided. The roller coaster prizes hit both large national entry-level builders and bespoke luxury home developers who build on speculation. Wood prices have now returned to earth – loud wealth, timber prices have fallen 68% after hitting an all-time high of $ 1,515 per thousand wooden feet in May to a current price of $ 485 per thousand wooden feet – but construction companies are not expecting a drastic market correction.
Yaron Yehoda has built luxury homes in Los Angeles since 2009, including projects in expensive zip codes in Pacific Palisades, Encino, Studio City, Brentwood, Beverly Hills and West Hollywood. “Yes, the prices have fallen. But you have to look at the enormous price they have come down from, ”explains Yehoda, whose architectural style is“ traditional with local elements ”. The price points for these homes range from $ 4 million to $ 10 million.
Turning to profit margins, Yehoda explains why some specification makers are on hold. “Those who build homes for $ 4 million and under are not building right now. These high wood prices are affecting the margins of this expensive home. In the $ 14 million to $ 20 million range, this won’t have as much of an impact on profits. “According to Yehoda, those extra budgeted dollars spent on wood will turn a $ 4 million home into a $ 4.5 million mansion.” Areas like Beverlywood, Beverly Grove, and around Melrose charge that price not, “he explains.
Richard Hirsch, founder of the Los Angeles-based manufacturer of fine wood floors Richard Marshall Fine Flooring, knows the wood business well. Hirsch has been creating and manufacturing luxurious solid wood floors for houses, estates, five-star hotels and resorts across the country for over 25 years.
“We did more business in the first half of this year than in all of last year. We get business that we won’t work on for a year or two,” said Hirsch. we can pass that on. It’s all about supply and demand as the cost of the trees has not increased, ”he adds.
Realtor.com’s chief economist Danielle Hale gives a perspective on the situation. “I know the big builders have consistently tried to manage their pipelines and make sure that in a year when the houses are ready, based on the high wood prices they paid in the spring, they move out of luxury specs”, said Hale.
“It’s very difficult for a builder in this $ 4 million Los Angeles area because when a house has to hit that $ 4.5 million price tag, buyers start comparing it to a slightly better area “, observes Yehoda.
Again, timber prices can go up and down, but the fundamentals for building specs and real estate remain. “It’s a location-based market,” said Yehoda, who plans to launch a new project in Beverly Hills next month. Marc Noah of Beverly Hills-based brokerage firm Hilton & Hyland is the exclusive agent for the property.
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