Why Is Lumber So Expensive Right Now?
Curious as to why lumber is 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. A lot of businesses faced a potential shortage and this caused major problems for those working in construction as well as 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 absolutely devastated the U.S. economy and a lot of sawmills were forced to shut down their production. Many people thought that there would be a slump in the housing market as well. Of course, the housing slump never arrived.In fact, quite the opposite happened. There now isn’t enough lumber to supply the market demand, and lumber is a sought-after commodity, with the sheer demand far outweighing the supply. The price of material soared during the first 13 months, and the estimated growth now stands at around 500%. The price 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 the lumber shortage is going to cost homeowners and prospective buyers a lot of money.
Surging lumber prices alone have pushed the cost of buying a family home way up. Now on average, you need to spend $35,000 extra just to secure the same type of property, prior to 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 a number of industries that are 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 so the surging demand can be met, but they cannot find the labor or the materials to do so. This is contributing to a housing shortage. Independent builders are also trying to compete with the demand coming from bigger construction companies. This contributed to a direct shortage of lumber. Tom McCarthy, a qualified real estate broker, has spoken to CNN, stating the estimated cost of lumber for a home build is going to hit $70,000. This is double the cost of building the same home just eight to nine months ago. The shortage, when combined with the price boom, is so extreme that some builders are having their raw materials stolen. Thousands of dollars of lumber have been stolen 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.
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 or not this is going to happen in the next year or next five years. Industry executives believe they are going to be able to catch up with demand. Experts predict this is going to 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 for people 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 are feeling the pain and becoming 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 and this issue is most affecting 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 tune that the commodity market is. Our prices have gone up in the neighborhood of 15-20%, whereas commodity wood has literally doubled/tripled/quadrupled in price. (200-400% increase). So while we are affected, we are not nearly to the state that commodities are.