Why Is Lumber So Expensive Right Now?
Why is lumber so expensive right now? Well, let’s dive in and answer that burning question. During the pandemic, the price of lumber skyrocketed across the United States. Many businesses faced a potential shortage, which caused significant problems for those working in construction and DIY experts who saw an opportunity to get some work done around the house. So why did the price of lumber increase so much?
The Pandemic Devastated the US Economy
The pandemic devastated the US economy, and many sawmills shut down their production. Many people thought that there would be a slump in the housing market. Of course, the housing slump never arrived. Quite the opposite happened. There isn’t enough lumber to supply the market demand, and lumber is a sought-after commodity, with the sheer demand far outweighing the supply. During the first 13 months, the material price soared, and the estimated growth now stands at around 500%. The cost of lumber was once between $200 and $400 for 1,000 board feet. Now, you’re looking at prices far beyond $1,000. CNN has reported that the lumber shortage will cost homeowners and prospective buyers a lot.
Surging lumber prices alone have pushed the cost of buying a family home way up. On average, you need to spend $35,000 extra on securing the same type of property before the pandemic. Even though lumber prices have gone up, businesses have said they have been able to pass the expense onto the customer by pushing the prices for homes. The problem is there’s still far more demand than there is supply.
Businesses Affected by the Lumber Shortage
The United States faced a lumber shortage in May of this year, and there are many industries currently affected. The CEO of Homes by Dickerson has released a statement saying he has never seen anything like this. He said his company would love to build more properties to meet the surging demand, but they cannot find the labor or materials. This lack is contributing to a housing shortage. Independent builders are also trying to compete with the demand coming from more prominent construction companies.
This demand contributed to a direct need for lumber. Tom McCarthy, a qualified real estate broker, has spoken to CNN, stating the estimated cost of lumber for building a home will hit $70,000 – double the cost of building the same house just eight to nine months ago. When combined with the price boom, the shortage is so extreme that some builders have their raw materials stolen. People stole thousands of dollars of lumber in the last few months alone.
Renters are Also Paying the Price
It would seem renters are now also paying the price. NAHB has estimated the price of lumber has added $12,000 to the market value of a newly built home. This means households are now paying up to $119 more every month, just to rent a property–just another reason contributing to why lumber is so expensive right now.
Sawmills Can’t Meet the Demand
This shortage can be compared to the housing boom that happened a number of years ago. New home builds crashed when the housing bubble popped around the mid-2000’s. This made sense because when you look at how things unfolded, it’s easy to see that the market was oversupplied. The downturn drove sawmills out of business and it also left the industry unprepared for the surge in demand that we are seeing right now. As if that wasn’t bad enough, COVID-19 then occurred. Sawmills eased their output in anticipation of another bust, as this is what happened in the past. They also had to grapple with the various health restrictions that were in place too.
Sawmills experienced great fear and when the housing market surge happened, they could not open up their capacity soon enough. The demand for lumber is also getting driven up by the amount of people who are doing extensions, renovations, and general DIY upgrades. Contractors are also finding it hard to source and pay for lumber, causing yet another headache for consumers. Workers cannot shoulder the cost of the lumber, so they pass on the expense to the consumer.
Why is Lumber so Expensive: Is this Situation Going to Resolve Itself?
There could be a sharp fall in lumber prices to come, but nobody can say for sure whether this will happen in the next year or the next five years. Industry executives believe they will be able to catch up with demand. Experts predict this will happen in the next 18 months, as the mills are coming back online, which could mean a positive turn is going to happen. The issue is the housing shortage. The only way to relieve the pressure on this shortage would be to keep on building new homes. The housing market boom does come with some pros and cons. Homebuilders may be smiling, but first-time buyers feel the pain and become demoralized.
If you want to source high-quality timber, or if you want to make sure you are not paying more than you should be for your lumber, contact Reliance Timber today. We are proud to say we are specialists in sourcing specific types of wood, including Eastern White Pine, Cypress, Douglas Fir, and Western Red Cedar. When you come to us, you can count on our team to provide you with fantastic service from start to finish.
So why is Reliance Timber able to provide a fair price for lumber? It’s because we’ve been staying ahead of the demand, not to mention we have a solid inventory too. This issue most affects commodities like framing lumber (spruce), pressure-treated wood (often for decks), plywood, OSB …
We are a specialty wood company. Meaning we do not sell commodities off the shelf. We are impacted, but not nearly to the commodity market’s tune. Our prices have gone up in the neighborhood of 15-20%, whereas commodity wood has doubled/tripled/quadrupled in price. (200-400% increase). So while we are affected, we are not nearly to the state that commodities are.
Looking Ahead: What to Expect in 2022 with Lumber Prices
The price of lumber affects almost everyone, limiting budgets for new home constructions, renovations, and minor household repairs. So why is Lumber so expensive and what will happen this year?
Many people have plans to build their dream homes or renovate their existing homes, but they have put those on hold due to the high prices of lumber.
Are lumber prices going down? That’s a difficult question to answer because of several different variables..
Canada Tariffs Play a Part
Canadian lumber is highly sought after because it’s some of the best wood for building. Canadian pine, for example, is exceptionally strong and ideal for construction. Unfortunately, the availability of Canadian lumber has become limited, and that has led to higher tariffs on imports.
A devastating storm hit British Columbia this past November, affecting the transport of lumber. The storm flooded rails, making them difficult or impossible to use. As a result, there was a 20% decrease in shipments. In some locations, the damage from the storm caused lumber shipping to stop entirely.
Another factor affecting lumber imports has been the four-decade-long trade dispute between Canada and the United States. The U.S. had concerns over whether the Canadian government was unfairly subsidizing their lumber industry.
As a result of the dispute, November 2021 marked a significant increase in the tariff levied against Canadian lumber imports. The new lumber tariff raised the cost of importing lumber to almost 18%—nearly twice the previous tariff. Such an increase will certainly trickle down to distributors and customers.
When anyone asks, “Are lumber prices going down?” the answer has to be that it’s unlikely as long as these Canadian supply and tariff issues remain.
How Supply Chain Issues Affect Lumber Prices
There aren’t many industries that escaped the COVID-19 pandemic and subsequent lockdowns unscathed, including the lumber industry, which relies heavily on manual and skilled labor to process and deliver shipments.
Since construction companies either stopped working or reduced the number of projects they took on, the demand for lumber also decreased.
The lower demand helped to bring a small drop in lumber prices, seemingly answering the question of when will lumber prices return to normal. Unfortunately, those prices didn’t drop quite far enough.
Currently, lumber prices are 15% lower than they were a year ago, but they still remain three times higher than pre-pandemic rates on average.
Are lumber prices going down in the near future? The answer may rely, in part, on whether the United States can resolve its supply chain issues.
Even now, there are still supply chain challenges relating to workforce shortages in almost every facet of the lumber industry. Sawmills can’t run at full capacity due to a lack of workers. In turn, they produce less lumber, and the demand for that limited supply drives up lumber costs.
The shipping industry is also facing issues with a reduced workforce. Fewer truck drivers and railway workers mean getting lumber to distributors is a slower process.
Insufficient logistics has led to a backup of lumber in warehouses and at ports. This bottleneck has produced a situation where low supply must meet increased demand.
Are lumber prices going down? That’s a question that won’t have a favorable outcome until these workforce and supply chain problems get resolved. While some efforts have been made to ease these issues, such as reducing restrictions on transportation workers, such efforts may not be enough.
When Is the Best time to Buy Lumber?
When will lumber prices return to normal? If you’re waiting for a return to pre-pandemic prices, you may have a longer wait than you expect, reports Better Homes & Gardens. Even though lumber prices continue to fluctuate, financial experts suggest we will see higher prices in the spring and summer.
On the Chicago Mercantile Exchange, lumber futures are trading 30% higher than the current lumber costs.
Additionally, seasonal demand is expected to be much higher this year. Throughout the pandemic, many people took a greater interest in home renovation and made plans for their spring and summer projects. The higher demand will only lead to increased lumber prices in the coming months.
Will lumber prices go down? Maybe not, but that doesn’t mean you have to put off your project.
