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Builders: Consider Adding An Escalation Clause In Contracts To Address Lumber Price Increase

By February 22, 2021One Comment

Given the dramatic increase in softwood lumber prices, builders should consider adding an escalation clause to contracts in order to address unexpected price increases in building materials.

Lumber prices have skyrocketed more than 180% since last spring. This price spike has caused the price of an average new single-family home to increase by more than $24,000 since April 17, 2020. NAHB is working with government officials to develop solutions to these sharp price increases which threaten housing affordability across the nation.

Escalation clauses specify that if building materials increase, by a certain percentage for example, the customer would be responsible for paying the higher cost. Including such a clause allows all parties to be on notice that the contract costs could change if materials prices change due to supply constraints outside the builder’s control.

View a sample Escalation Clause for Specified Building Materials here.