The last year has been nothing short of unprecedented. With the world emerging from a global pandemic, there have been drastic changes in our lives and our economy. Lumber prices rose by more than 250% in the last year, according to Business Insider. The National Association of Homebuilders said the increases added more than $36,000 to the price of the average single-family home. The rising price of lumber is just one of the many commodities impacted by the change. Today, we look to help explain why lumber is rising, how it affects your home remodel, and what the future holds for the rising price of lumber.
Why Is Lumber Rising?
The COVID-19 shutdown caused many lumber mills to close temporarily and slow the production of lumber. As the economy has started to ramp back up, lumber mills cannot keep up with the shortage in supply, thus causing an increase in the price of lumber.
Increased Freight Prices
Freight prices have increased greatly internationally but also domestically. Trucks that are responsible for delivering goods all around the country have run into constant delays and rescheduling due to the shortage of consumer goods and the lack of clarity on when these goods are available. Additionally, Amazon has seen a 60% increase in third-party shipments since the start of the pandemic. This has further added to the freight gridlock we are seeing around the country. When the price of freight increases on a commodity, it is passed on directly to the consumer. This has greatly impacted the cost of lumber.
With record low interest rates, the real estate market has exploded. This increase in demand has spurred an increase in remodeling. Additionally, over the last year there was a huge increase in DIY projects. With people stuck at home, a common theme arose, let’s tackle some home improvement jobs. These factors have led to increasing the price of lumber.
Furniture Sales Spike
The need for a home office rose like never before due to COVID-19. With individuals needing office furniture as well as replacing other furniture, furniture sales shot up. Well, as we know, furniture is mostly made of wood, thus affecting the supply and demand of lumber.
A major factor that flies under the radar in regards to lumber prices are the California Wildfires. Not only do these wildfires disrupt the lumber operations but they create a need to rebuild homes that otherwise wouldn’t have needed to be rebuilt.
Limited Import Options
When a commodity goes on a shortage,a good solution is to look to other sources to manufacture it. Lumber is different from other commodities when it comes to importing. There are limited locations where lumber can be imported from due to a variety of different factors. For example, it is extremely difficult to import lumber from a country like China due to the potential risk of invasive species traveling within the lumber. These types of limitations influence the rising price of lumber.
Over the last few years there have been accusations against Canada for unfair trade practices which caused the imposing of a nine percent tariff on all Canadian imported lumber. To make matters worse, last month a U.S. Commerce Department report concluded that the country needs to double the tariff on Canadian lumber from 9% to 18%. These tariffs are ultimately paid by the consumer as they get passed on when the lumber is purchased at the retail level.
How Does it Affect Your Home Remodel?
The rising lumber prices will affect your home remodel in a variety of ways. The biggest is the time that it takes to receive your lumber order. What used to take three to five weeks now takes nine to twelve weeks. Below we outline how each remodel will be affected by the rising price of lumber.
The rising price of lumber won’t affect your bathroom remodel too much. There isn’t a whole lot of reframing or lumber needs that typically go into a bathroom remodel. With that being said, delays can be expected in the timeline for your lumber delivery.
While you may need more lumber than your bathroom remodel would require, you still won’t see a huge increase in price due to the price of lumber. With many kitchens going to a more open floor design, lumber usage has been greatly reduced with the removal of walls.
When you are looking at a decision to add to your home, lumber will most definitely be needed. This is where you will feel the biggest price increase as the addition of rooms and levels will need framing and lumber.
What Should We Expect in the Future?
There seems to be some light at the end of the tunnel. On June 15th, 2021 lumber prices started to drop. Futures for July delivery ended Tuesday at $1,009.90 per thousand board feet, down 41% from the record of $1,711.20 reached in early May. Futures have declined 14 of the past 16 trading days. Cash lumber prices are also crashing. Pricing service Random Lengths said Friday that its framing composite index, which tracks on-the-spot sales, dropped $122 to $1,324, its biggest-ever weekly decline.
As COVID continues to get further and further in the rear-view mirror, one thing will always remain the same, the OHi family is here for you. Don't hesitate to reach out to our staff with any questions that you may have regarding the increase in the cost of goods and how it will affect your home remodel. Hopefully, prices will be returning to normal very soon.