Home builders and lumber yards are whipsawed by rapidly rising lumber prices that are keeping home buyers out of the market just as COVID-19 retreats, powering rising demand for housing.
In yet another casualty of the coronavirus pandemic, lumber mills were forced to shut last year. When they reopened, pent-up demand led to skyrocketing lumber costs.
“We’re taking it one week at a time,” said Johnny Carrier, whose family-run home building company, By Carrier in Plainville, Connecticut, builds developments of 30 and more homes. “It’s been very hard to put our finger on what’s going to happen. It’s very unpredictable.”
Carrier said he’s advising customers to wait a year before hiring a builder, anticipating that prices will return to earth.
“People who have a choice are choosing to wait,” he said.
Lumber yards are offering similar advice. The more flexible a customer is on delivery time and type, brand and color of materials and products, such as siding, decking or roofing, the easier it is to fulfill orders, said Richard Fechtor, vice president at the Hartford Lumber Co. in Hartford, Connecticut,.
Some manufacturers are reducing their lines of product colors and styles and are “cranking out as much as they can,” he said.
Waiting times can be up to three months, he said. And taking one’s time to build or add to a house could be a consumer’s most effective weapon in helping to cut prices, he said.
“If people keep paying these prices, there’s not much incentive for prices to fall,” Fechtor said.
The price of framing lumber, which is used for building, jumped from about $500 per 1,000 board feet in December to about $1,500 in May before falling to $1,300 this month, according to the National Association of Home Builders.
Like much else that’s occurred in the past 15 months, COVID-19 takes a large share of the blame.
“The genesis of this unprecedented rise can really be found at the onset of the pandemic when lumber mills had to shut down,” said David Logan, director of tax and trade policy analysis at the National Association of Home Builders.
The mills closed just as demand for housing and housing starts were at their highest in decades, he said. An initial imbalance of supply and demand was expected when mills shut down, but it’s persisted much longer than it should have, Logan said.
Home builders don’t see demand letting up for the rest of the year, and it’s expected to remain strong in 2022 “because the fundamentals driving the housing market were very favorable heading into 2020 anyway,” he said.
Rising lumber prices add about $36,000 to the cost of a $300,000 home in Connecticut, a price which is at the low end of the market in the state, said Eric Person, chief executive officer of the Home Builders and Remodelers Association of Central Connecticut. The added cost is pricing many buyers out of the market, he said.
Futures, which are the prices buyers signal they’re willing to pay for lumber delivered in the future, have headed down recently, pointing to some price relief. The still-high costs have prompted many home builders to pull back from contracts because they can’t price a home at a time of wildly fluctuating prices, Person said.
“By the time the foundation is laid, prices for lumber are out of whack,” he said.
Other factors affect lumber prices. Person said a tariff war with Canada over softwood lumber has been a factor.
Fechtor said demand for housing is fueled by ultra-low interest rates. “What matters is demand, nationally and globally,” he said.
Carrier said labor shortages are adding to builders’ headaches, particularly for workers who lay foundations, pour concrete and frame houses. In addition, trades are hurting for workers in plumbing; heating, ventilation and air conditioning; and carpentry as baby boomers retire.
And delays in building products, such as windows, are another factor slowing home construction, he said.
“We’ve been building since 1971, and we’ve never seen anything remotely like this,” Carrier said.