Lumber prices triple over last year and continue to increase
WAUSAU, Wis. (WSAW) - Lumber prices have tripled in a year as demand for building supplies remains high, but builders fear the prices will hit a point where consumers will not be able to sustain. Builders had hoped the prices would have subsided by spring, but the reality is the opposite.
There are a variety of factors that have impacted the price of lumber and other building supplies. One of the biggest has been the initial blow of the pandemic last spring.
A ripple effect
“When it first happened, we went into the shutdown, I mean, business was falling off,” Geoff Borst, the Builders FirstSource general manager in Wausau said.
He explained he and other suppliers did not stock up for the building season in the way they typically do so as not to have expensive wood sitting in storage with no place to go. Suppliers were not the only ones to do that.
“The lumber mills and the lumber industry made the calculation that housing was also going to come to a complete stop and it didn’t,” Jim Tobin, the executive vice president of government affairs for the National Association of Home Builders said.
“When things went the other direction, everyone was caught,” Borst stated.
He said since the June boom, the industry has not been able to catch the supply up with the demand, especially when manufacturing plants and mills had to close due to outbreaks or reduce staff sizes.
“We have a trust plant in De Pere,” Borst began. “We had to shut that down because of a breakout of COVID and it just compounds that being behind and not catching up.”
The U.S. production of lumber also cannot keep up with demand in a typical year. The U.S. imports about 30% of its lumber supply from Canada, which currently has a 10% tariff on those products.
“We are imploring the Biden Administration to enter into a new Canadian softwood lumber agreement with our trading partners to the north,” Tobin urged. “We think that would help supply issues and also pricing issues.”
“(We’re) also asking for domestic producers to ramp up production,” the executive director of the Wisconsin Builders Association Brad Boycks said. “You know, if we could get a cut of that lumber coming over from Canada, couple that with increased production, that would hopefully go a long way to bring that price down.”
On top of that, other supplies like resin to make some of the lumber materials as well as parts for windows and doors that are made overseas have also dealt with COVID-19 closures and impacts, reducing the availability and bring up the cost. The cost of plywood or OSB, Boycks stated, went from $582 per thousand board feet in the last lumber price spike in 2018 to more than $1,300 currently.
“The real victim here is the American consumer”
“We’re looking at $24,000 more for a single-family home,” stated Boycks. “That’s just going back one year; that’s from April 2020. Also, multifamily homes are about a $9,000 increase, so these are substantial increases to the cost of housing.”
There was already a housing crisis before the pandemic. It was a crisis of having enough affordable housing, as home prices continue to increase and younger generations are strapped with mounting debt. It also was about having enough homes for the demand, as many people in the Baby Boomer population decided to stay in their family-size homes at the same time their children and the generation before them have entered the family-home buying market.
Tobin said there is about a two-month supply of existing homes for sale currently, which does not meet the demand for housing. Building new homes and apartments have been the source to meet the demand for housing, but the country is still falling short.
“We’re going to build about 1.4 million homes, single-family homes, and apartments this year; we need to build about 1.6 (million) to keep up with demand,” Tobin explained.
The Wisconsin Builders Association released data showing a 35% increase in the number of home building permits from January-March 2020 to the same period in 2021. That is the time of year builders typically are slow. Borst said it never let up this year.
Prices of homes continue to go up too. Borst said the weekly pricing sheets he receives from manufacturers went up in price by 10-15% depending upon the commodity in a month’s time.
“How do you build a house when you don’t know how much it’s going to cost from conception to moving in,” he asked.
However, Borst said in speaking with his customers, people want to move forward now with their home or project despite the cost for fear it will only increase more. Borst stated while business is booming, they are lowering their profit margins to help cushion some of that extra cost. Tobin said the mills are the ones benefitting the most out of this situation.
“The one fear lingering out there (is) that these costs continue to increase and some people that were, you know, still moving forward with the project that at some point, that price point is going to be too much and they’re going to say I can’t move forward with the project,” Boycks said. “So, it would be a shame when the industry is in such good shape and people, seemingly, have a little extra money to spend, low-interest rates, if we get caught up and have to have a significant decrease because of these escalating lumber costs.”
“The real victim here is the American consumer and the American homeowner and renter,” Tobin stated. “That’s who’s really bearing the brunt here.”
Builders, of course, encourage people to continue building but urge people to plan now and keep in contact with their builder and they asked for patience.
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