Why Are Lumber Prices Up 171%, and What Does That Mean For Contractors and Suppliers?
By Kelsea Mann
Since the beginning of the Covid-19 Pandemic, lumber prices have been skyrocketing, yet wood production has also hit a 13-year high. Loggers are taking advantage of the high cost of wood during this time to produce and sell more wood, but the prices aren’t expected to drop anytime soon. The high cost of lumber affects every member of the supply and logistics chains in the construction industry, all the way down to the customer. Keep reading to find out why the cost of lumber is so high, and how to equip your business to handle this spike.
The lumber shortage and following spike was predicted by many notable sources, such as Fortune Magazine, as distantly as August 2020. The cause of the shortage is the state-wide lockdowns, which mandated sawmills across the country to close in the early months of the pandemic. At the same time, it was a largely held belief among economists that the housing market- one of the most demanding markets for bulk lumber- would downturn or even collapse. However, economists have observed trends going in the exact opposite direction.
In August 2020, sales of new homes hit their highest level since July 2006, and home construction climbed 26%. Fortune cites “A combination of lower interest rates, an influx of first-time millennial home buyers, and a 50% rebound in the S&P 500” for this change. Pandemic or not, roughly half of the United State’s softwood is used up by the construction industry for boards and planks. Lumber also makes up a large piece of total exported goods from the United States, countries like China- which imports half of it’s softwood from the United States- are valuable business for the United States.
The rise in demand and forced lowering in production are the biggest contributing factors to this lumber shortage, and simultaneous price spike. Sawmills that were shut down in the end of 2020 are planning to ramp up production due to the more recent wider distribution of the vaccine. This ramping up is predicted to continue through 2022–23, and will work in favor of those looking for lumber at a cheaper price.
However, your business should be weary that the lower price could attract more potential consumers. DIY Homeowners and those who are in the market for a newly constructed home are waiting for the spike to end, too. While lumber is generally purchased and sold to those within the trades industries, interest in ‘quarantine home improvement’ and other weekend projects has also grown during the pandemic. Spring, Summer and early Fall are ideal times for homeowners to work on projects outside, and the price of lumber may not significantly fall again until the winter, or early 2022.
The lumber crisis is so dire, in fact, that the National Association of Home Builders has written a letter to President Joe Biden and Secretary of Commerce Gina M. Riamondo asking for help solving these issues. In their open letter, the builders pointed out that the price of lumber has added more than $24,000 to the price of a new, average single-family home, and $9,000 to the price of a multifamily home since April 2020. The Association hasn’t received a response, but it’s clear that this crisis will need to be resolved as the nation awaits the closing of the COVID-19 Pandemic.
Follow PartRunner wherever you’re reading this story to hear the latest developments as we follow this story, and to stay informed about trends in technology, logistics, supply chain management and more.
