Costs of building materials have increased substantially over the past year. So much so, in fact, these costs have made front page news and have been featured heavily throughout the media. Price increases are affecting nearly all materials associated with building, from boards to nails and more. The one item we have heard the most buzz about is lumber. According to the National Association of Home Builders, lumber prices have risen over 300% since last spring. The results have affected residential and commercial building alike! With this in mind, Archadeck of Central SC dug deep to learn why lumber prices have skyrocketed.
Reason #1 – Supply and Demand
The real estate market is booming, along with new home construction. This boom has trickled down into home remodeling and renovations. Inevitably, if there is an increase in demand on an item, it will affect the supply. In the case of lumber, we have seen such a high demand for it that keeping it supplied to all who want it became difficult. In turn, the lumber providers have had to pay higher prices to keep supply available. Those higher prices are passed on to the consumer.
Reason #2 – The Pandemic
It is nearly impossible not to mention the pandemic when talking about today’s lumber prices. It is true the Covid-19 pandemic brought an onslaught of homeowners adding to or upgrading their existing homes. Some remodeled when jobs shifted to a “work from home” scenario and they needed additional functional space. Many homeowners who wanted to sell and move to a home with more amenities and space were thwarted by quarantines and social distancing. Many chose to stay and upgrade their existing homes instead, where spending more time at home created a desire for more living space. We witnessed a surge in not only interior space upgrades, but outdoor living space remodels and builds as well. Clearly, the industry was unprepared for this push for more building and the need for increased supplies during Covid-19. Material shortages began, as a result, leading to an increase in costs.
Reason #3 – The Great Recession
Backing up a bit, remember the Great Recession, the housing market decline in 2007-2008? During this period, many lumber providers took a big hit. As a result, they streamlined their processes to minimize the impact of their losses and to prevent future loss of revenue. Much of the industry has been on its heels since the Great Recession and slowed down production accordingly. This included closure of sawmills, reduced production and a reduced supply.
Fast forward to the present time. Sawmill closures and the elimination of production lines are not easy to reverse quickly. According to an article from the Wall Street Journal, despite the lumber boom, few new sawmills are coming our way. The piece states that executives in the cyclical business of sawing logs into lumber say they are content to rake in cash while lumber prices are sky-high. They aren’t in a hurry to build new mills. These cost hundreds of millions to construct and can take two years to build from scratch. This adds another layer to the scenario of increased lumber prices we have today.
Reason #4 -- Canadian Tariffs on Lumber
Last but not least, the tariffs on softwood lumber coming out of Canada are playing a role in current lumber prices here. The US and Canada are long-time trade partners in lumber. As of late, we have had to lean on our reliance on Canada to satisfy the growing demand. However, there is currently no trade agreement in place. While the US reduced tariffs on Canadian softwood lumber imports in December 2020, tariffs still add to the overall cost for builders.
The Perfect Storm
The combination of reasons leading to our current lumber situation can be mind-boggling. The timing and circumstances that got us here are the result of what can be described as a perfect storm. Many single elements combined to give us the current increased sticker prices for lumber.
With higher costs at play, you might be tempted to put off your outdoor living project. Archadeck of Central SC cannot say when (or if) lumber prices will return to normal. Given the proposed infrastructure spending plans, it doesn’t seem likely that costs are going to retreat anytime soon. Most economic experts predict that it will be some time before the cost of wood goes back down. Some say we might never see lumber prices as low as they were in early 2020. Waiting for the return of pre-pandemic prices may be like waiting on a ship that never sails, leaving you stranded on the shore!
Rest assured, as part of our goal to provide the most value and attention to each project we build, Archadeck has your back. Our customers are protected against further price increases from the time you sign a contract with us. At that point, we accept all risk going forward that prices may continue to rise. Once you sign a contract for us to build your project, your cost will not increase regardless of changes in market prices for building materials.
Contact Archadeck of Central SC with any questions you have about your anticipated outdoor living space addition. We are here to help answer all your questions and concerns.
The Archadeck of Central SC team (left to right), Tucker, Mike and Marshall Reu.