Whether you are one of the large number of homeowners who have undertaken home improvements over the past year, or are in the process of building – or considering building – a new home, you may have noticed that lumber prices are CRAZY! So, you might ask, what is the deal?
The fact is that lumber is an incredibly hot commodity right now causing prices to soar. Demand has exploded and suppliers have struggled to keep up. Just how much higher are lumber prices now than they have been historically? Well, in just one year, the price of lumber has increased 377% to a record high of $1,635 per 1,000 board feet. For context, lumber has historically fluctuated between $200 to $400 per 1,000 bd. ft.
Let’s take a look at what that means for building a home. The average new single-family home takes about 16,000 board feet of lumber to construct. A new house that would have cost $10,000 in wood to get off the ground a couple of years ago now costs $40,000 worth of wood. That is assuming you can even source the lumber.
We know that the shortage of lumber is what is causing the explosion in prices, but why is the supply and demand so out of whack? There are a number of complex factors that can be broken down into the following:
- Tariffs on Canadian lumber in 2017 caused imports to decrease and prices to be volatile, ultimately resulting in the closure of a number of sawmills and decreased production capacity.
- The onset of COVID-19 in early 2020 led to labor shortages that also reduced production and supply.
- Early in the pandemic, the lumber industry expected a slowdown, not an industry-wide boom.
They were wrong.
It seems that lockdown boredom and extra cash led people to decide it was time to fix up their homes. Similarly, the increase in remote working freed up people to move, and they didn’t just buy existing homes but also built new ones.
So where are we now? Lumber prices continue to set record highs, the National Association of Home Builders (NAHB) has reported that the cost to build a single family home has increased by $36,000. While most of the cost can be passed down to the homeowner, the extremely tight supply leaves homebuilders unable to start more projects.
The concern is that lumber prices could reach a flashpoint, where affordability becomes so limited that demand suddenly falls off. To avoid this, the NAHB is requesting that the federal government temporarily pause on Canadian lumber tariffs. It seems they are listening, as U.S. Trade Representative Katherine Tai recently told Senate lawmakers that she would “push for solutions to the lumber pricing issues”.
So … this leads us to the question, what should you do if you are considering a renovation or building project?
- Don’t wait to start the process. Now might not be the right time, but do your homework and be prepared. Keep an eye on the overall industry, organize your ideas, and even get your blueprints ready so you will be prepared when the time is right!
- Be patient! The increased demand and the fluctuations in material costs are making it difficult for builders to get pricing confirmed and locked in. Every segment of the industry – from concrete and lumber to tile and plumbing fixtures – is overloaded right now! Be aware that you will wait longer just to find out what a project is going to cost. And of course, that will also apply to start dates for projects as well…several months can go into prints, pricing and permits before a project actually starts.
- And, of course, expect higher prices. If you received estimates over the last couple of years for projects and didn’t move forward, expect that they will cost more now. Labor continues to be an issue for many tradesmen which is impacting labor costs.