The Inside Outside Guys: Lumber pricing through the roof
Who would have thought homeowners would have to be making a choice between eating and buying lumber for that new deck? Just kidding. But the recent surge in lumber pricing is very real and the impact on housing costs is having a huge ripple effect on the construction economy.
According to the National Association of Home Builders, NAHB, lumber production is at a 13 year high.
Despite this reality, contractors are having difficulty obtaining lumber for even the smallest of projects.
To make matters worse, lumber pricing is at an all-time high with current pricing over 200% higher than a year ago. The industry purchases lumber in volume units of 1,000 board feet, MBF. A year ago we were paying $358 per MBF. Today that number is above $1,000 and projected to move even higher in the coming months.
The reasons for this are many. While some states forced lumber mills to shut down during the pandemic, we saw an uptick in DIY projects. According to NAHB, 41% of homeowners undertook a home improvement project while “stuck” at home. This unanticipated demand helped to create a supply/demand mismatch.
Add to the equation the national housing shortage and the low “cost” of borrowed money that is spurring new construction throughout the country. Home buyers and builders are buying any available stocks regardless of price.
Canadian tariffs that some peg at 20% combined with speculation in the lumber commodities market are also believed to contribute to the shortage.
The NAHB tells us the price impact on new homes is around $28,000 per house! That translates to an additional $10 per square foot on the typical new home. In the Midwest we pay, on average, about $129 per square foot for new residential construction, so the added lumber cost alone accounts for a near 8% increase in the cost of a new residence!
The question begs, whether talking about a new deck or a new home, “is the added cost ever going to be recouped?” The answer is up in the air.
It is predicted this dilemma will continue to be an issue well into 2021. At some point supply will catch up with demand and the pricing will settle back down. But if history is any indicator that “new” price will still be higher than what we paid in 2020.
Even though there is a shortage of buildable lots throughout the country, the industry will continue to accelerate new home construction due to the housing shortage. This will continue as long as money is cheap. When mortgage rates are low, the relative cost of owning a house looks good when compared to the cost of renting your housing.
Statistics also show that many homeowners are delaying projects due to the pricing and subsequent time delays. Unfortunately this will only act to prolong industry backlog much like what we saw in the 2008 recession.
The shortage of wood is driving some buyers to look for alternatives. High-end Trex and similar products for your deck that may have seemed expensive a year ago, now look very affordable as an alternative to a wood walking surface.
Housing systems such as Insulated Concrete Forms, ICFs, and Structural Insulated Panels, SIPs, are seeing a boost as an alternative to lumber intensive “stick” framed homes. Just a few decades ago we saw some experimenting with lightweight steel framing for homes. So this may also develop some traction as an alternative to wood.
Will our housing lose value due to these added costs? If history is to be trusted the answer is “no.” The industry as endured many similar commodities price increases while housing values in nearly all markets continue to climb. Witness the most recent rebound from the 2008 recession.
So if your home has needed repairs or you are simply looking to add space, contact your professional early and lock in the pricing. As always, you can find trusted pros at Insideoutsideguys.com.
For more home improvement advice, listen to the Inside Outside Guys every Saturday and Sunday on News/Talk 760, WJR-AM, from 10 a.m. to noon or contact us at insideoutsideguys.com.