Whether it be homeowners, contractors or hardware stores, everyone is feeling the spike in the cost of lumber.
The pandemic spurred home improvement projects or people buying houses, which has led to price increases for materials. For lumber, those price increases land in the ballpark of 250% according to various estimates. That then affects anything that has to deal with wood, from your do-it-yourself home improvement project to matching the high demand for housing. The National Homebuilders Association estimates the spike has added $35,872 to the price of an average single-family home in the past year.
So what led to this?
There are a number of factors, including tariffs, wildfires and labor demands. But one notable challenge was the demand increase came just as sawmills were temporarily closed because of the pandemic.
Around that time, Nathan Perry, an economics professor at Colorado Mesa University explained, the housing industry entered uncharted territory that is best understood by going back to the last economic downturn.
“In 2008 there were a ton of houses built locally, but then the economy and oil and gas collapsed. So you had open homes on the market and builders left. But for the last three years, we’ve needed more single family homes,” Perry said. “The industry (last spring) was caught off guard because they expected the slowdown from 2008. Then people started home projects or started buying homes.”
Perry said what’s unique about this situation as opposed to 2008 is that the Fed went out of its way to create the boom with its low interest rates, which encouraged further home buying.
‘I GOT OUT AT
THE RIGHT TIME’
Roger Taylor, owner of Discount Lumber & Metal Roofing, 2660 Interstate 70 Business Loop, stopped supplying lumber a couple of years ago.
Tending to lumber is tedious and comes with thin profit margins and, since he was nearing 60 years old at the time and essentially runs the company on his own, he opted to stop buying it entirely.
When the COVID-19 pandemic began and needs increased, Taylor looked into carrying it again until he saw the prices. He still has and sells lumber, but he isn’t actively buying.
“I got out at the right time, the prices are just crazy now and you don’t know when they’ll end,” Taylor said.
It’s already difficult for smaller companies to keep tabs on their lumber. You have to keep wood dry. Otherwise it can warp or, if the interior gets wet, it can mold. That’s why it’s often tied in bunches and stored under tarps outside.
Taylor would always anticipate to lose a chunk of the wood he bought.
“You’re not going to turn a huge profit on that stuff because you don’t know the shape it’s in and it’s from nature so it plays by its own rules,” he said. “It’s like a box of chocolates, you don’t know what you’re getting.”
That volatility, plus the rising prices, didn’t seem worth it to Taylor.
Taylor has owned his business for 28 years and said he hasn’t seen the industry in this shape since 2008.
And though he’s out of the lumber business now, he can’t escape the increase of material prices.
His specialty — steel and metal — aren’t immune to the price spikes, either. By his estimation, prices have surged by about 50% since the pandemic began and have increased every month this year.
Supply chains are now backlogged. Taylor said some steel orders are delayed by months and that he and his friends in the industry are expecting to run out of materials before they run out of customers.
The strain on construction materials has had predictable impacts on area homebuilders.
“When any of these costs increase, it makes it harder to provide enough attainably-priced housing to meet our state’s demand,” Ted Leighty, CEO of the Colorado Association of Home Builders, told The Daily Sentinel. “We also know that increases in the price of a home in turn prices hundreds of homebuyers out of the market, so it’s critical to keep costs under control.”
According to the April Bray Real Estate Report, there were only 166 homes on the market to end last month. The average days on the market compared to April 2020 are down from 68 to 44, and 358 building permits were issued. That’s a 58% increase from last year.
Leighty said they’ve been calling on state and federal politicians to help devise solutions.
“With the cost and supply issues related to lumber, in particular, we have been calling on our Colorado Congressional delegation and the Biden Administration to examine the supply chain and seek remedies to increase production, increase the domestic supply of timber from public lands — which could provide even more employment opportunities for Coloradans,” Leighty said. “(A)nd negotiate a new softwood lumber agreement with Canada. These efforts will increase the supply of lumber and help bring costs down.”