Steve Freeman Commercial Real Estate

  Builders to Add Escalation Clauses Due to Rising Lumber Prices. To help protect themselves from ongoing price increases in the lumber market, more builders are adding escalation clauses to their sales or construction contracts. The rising and volatile costs of lumber continue to hamper the new-home and remodeling markets. Lumber prices nearly doubled over a four-month period in 2020 and have continued to reach new highs. The price and availability of building materials have been cited as one of the top challenges that homebuilders face at a time when the real estate industry is calling for more housing inventory to meet surging buyer demand. Forty-seven percent of builders said they were “including price escalation clauses in their sales contracts,” according to the most recent National Association of Home Builders and Wells Fargo Housing Market Index survey. Also, 10% are including shared price clauses in their contracts. Shared price clauses are similar to price escalation clauses