For 20 years, the National Association of Home Builders has been tracking the availability of building materials in the United States.
“Shortages of materials are now more widespread than at any at any time since ... the 1990s, with more than 90 percent of builders reporting shortages of appliances, framing lumber and [oriented strand board],” wrote Paul Emrath, senior economist for NAHB, on June 2.
And shortages mean price increases.
Since April 2020, the cost of lumber has increased 180 percent, according to the NAHB, and that has added $36,000 to the average price of a new single-family home.
“The escalating lumber prices are largely due to insufficient domestic production and extremely large lumber mill curtailments that lasted well into the 2020 building season,” states the NAHB.
“It’s through the roof,” said Richard Ryder, a tech specialist for building trades at Southwest Tech in Bennington. “A year ago we were paying $30 for a sheet of plywood and now it’s over $75. I don’t know how people can afford to build with the price of lumber right now. And it’s not just lumber, it’s everything to do with construction.”
On June 10, the price of random length lumber was $1,122 per thousand foot.
While the futures market expects that to drop to $781 by July 2022, that’s still more than double the price it was, $330, in May 2020.
In June 2020, the price started going up, hitting $800 in August 2020, and then fluctuating between $500 and $850 through March 2021. And then in April, building season began. The price hit $1,212 per thousand foot and in the middle of May it went through the roof, to $1,495, with Canadian softwood hitting more than $1,650.
“Many homeowners were stuck at home, unable to vacation,” wrote Bill Conerly for Forbes. “With time and money on their hands, they headed to the local building supplies dealer for the materials to build decks, playhouses, she-sheds and even additional rooms.”
Then, in the fall of 2020, singe family home starts increased dramatically. By December, they hit levels not seen since 2006, driven by a drop in the mortgage interest rate and an increased demand for homes.
Sales of new single-family houses in April 2021 were at a seasonally adjusted annual rate of 863,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development, an increase of 48 percent over the previous April, at 582,000.
For someone just picking up a 2x4x10, increased demand and limited supply means that piece of wood will cost you $12 or more at the local hardware store.
“Our construction estimates and bids are coming in 20 to 35 percent over budget,” said Bob Stevens, of Stevens and Associates, an engineering firm in Brattleboro. “Most folks expect this to be a peak that settles back to a 10 to 15 percent increase by late fall. In the meantime it is making it hard to get new projects out of the ground.”
SUPPLY AND DEMAND
In addition to the high prices, said Josh Druke, vice president at WW Building Supply in Newfane, “It’s really difficult to procure things.”
“Pressure-treated wood used to take two or three days,” he said. “Now it can take up to four weeks.”
“It has the earmarks of a classic supply and demand situation,” said David Carle, spokesman for U.S. Sen. Patrick Leahy, D-Vt. “Most lumber processors scaled back production when the pandemic began, anticipating a dip in demand — a dip that never came and instead became an unexpected housing and renovation boom. They sold out of inventory quickly and it’s taking a big to ramp production up.”
“Wood products companies would like to add capacity, but a new mill takes about two years to build,” wrote Conerly, who said production has shifted to the southern United States from Canada due to a pine beetle infestation.
And labor shortages are contributing to scarcity of product, not only in the rural areas where lumber mills are located, wrote Conerly, but also in truck drivers across the country. And remember when all those petrochemical plants shut down in Texas last winter when the grid collapsed? That’s led to a shortage of glue shortage used in plywood and OSB, noted Conerly.
“It’s awful,” said John Allen, who’s been a general contractor in Brattleboro for 35 years.
Before the recent surge in prices, Allen said he could pick up a premium 2x4x10 for about $3.
“Now they are $13,” he said.
Despite the increase, he said, he has to turn down jobs.
“I can’t figure it out,” he said. “I get two or three calls a day from someone wanting to build a deck or redo a bathroom. It makes absolutely no sense because the lumber prices are so ridiculous.”
Scott Mathes, of Mathes Hulme Builders in Brattleboro, said he’s also been getting a lot of work.
“We haven’t had anybody postpone a project because they can’t afford it,” he said.
But the price fluctuations and supply chain disruptions make it hard for him to predict when he can get to a job and what the price will actually be.
“In the past, it took maybe two weeks of lead time, but now it’s eight to 16 weeks,” said Mathes. “It makes it very difficult to plan and set expectations for clients.”
This can be hard on some contractors who signed off on estimates before the price increases, he said.
“If you have a contract with a set price and the materials change as much as they have, you are eating that price change,” said Mathes. “If it’s 1 or 2 percent, it’s not a big deal, but in a lot of cases, the difference is 10 to 25 percent. It means some people in this business are taking a loss. Hopefully, they’re not going out of business.”
Businesses like Unity Homes in Walpole have had to rewrite their contract templates, said Andrew Dey, operations manager, to make sure they are prepared for such wildly fluctuating materials costs.
“Some of the projects we are buying materials for now are for contracts signed six or nine months ago with certain assumptions about the cost of materials,” said Dey. “Right now we are eating the losses. It’s not a huge deal, but it does hurt.”
Unity Homes manufactures the components for energy efficient homes in its factory in Keene, N.H., and even with the price increases, demand is high, said Dey.
“We have had more work than we’ve ever seen before,” he said.
And while Unity can write into a materials clause in a contract, finding enough people to meet the demand is a big problem.
“We already had trouble finding enough people to do the work before the pandemic,” said Dey. “The capacity of our factory in Keene is 150 to 200 house a year. We’re not even approaching that yet.”
Druke said he is also having problems finding employees, and it’s not just because of the pandemic or enhanced unemployment benefits.
“We had an employment problem in Vermont before the pandemic,” he said.
Trevor Allard is vice president of Allard Lumber in Brattleboro, which produces mainly hardwood products that are shipped around the world.
Allard has about 50 employees, and most are experienced and have been with the company for many years.
“But the entry level jobs are hard to fill,” he said.
When the pandemic first hit, said Allard, production actually picked up at the sawmill.
“We didn’t know if we would have to shut down,” he said. “We had all our winter wood piled up and worked some extra hours to get our log pile down, because logs stain in the heat.”
But this wasn’t true at other sawmills in North America, said Joe Miles, owner of RK Miles with eight locations in Vermont and two in Massachusetts.
“When this whole thing started, the industry was caught flat footed,” he said. “Mills ramped down production and the next thing you know, everybody wants to buy, buy, buy. There are a firms that make a lot of money making these predictions and they’ve been dead wrong.”
And even though demand has skyrocketed, some mills, like one in Maine where he gets some of his products, have to shutdown for scheduled maintenance.
“Which puts more pressure on pricing,” said Miles.
Not knowing when they will receive product means contractors that depend on them are often at wit’s end, trying to schedule projects and to come up with reliable quotes for their customers, said Miles.
Mills in the southern United States are trying to meet the demand said Miles, but they produce yellow pine, which is fine for some applications, but is not much in demand in the Northeast.
“It’s difficult wood to work with,” he said. “If I tried to sell yellow pine for framing, it would not be welcome here.”
Allard said “the perfect storm” of factors that led to the price increases can be traced all the way back to the 2007 subprime crisis.
“We have not gotten back to the production levels we were seeing in 2006 and 2007, when a lot of people went out of business,” he said.
He also noted there is not a huge margin in lumber.
“Producing 2x4s, it’s really tight,” he said. “It’s like milking cows, where there are small margins. Dairy farmers have to milk whether they make money or not. Big softwood lumber production is the same way. Some years they lose money. Working in the commodities market, that’s how it works.”
It’s not just hardware stores and contractors that are feeling the bite, said Gail Grycel, who just retired from her custom cabinetry business, but still teaches woodworking at the HatchSpace, a makerspace, workshop and education facility for woodworkers in Brattleboro.
“This is where the pricing gets prohibitive for those wanting to learn,” she said. “They are victim to project material costs that seem way too much for a small project that they might not be perfect as they learn. Even something small and simple out of pine is a financial burden on top of the cost of a class.”
Like so many people, Grycel also has a home project, tiling the floor of her apartment.
“I finally got the tile after three months,” she said. “That is the other challenge for contractors. How does one stay on some kind of schedule, especially if having to coordinate with other contractors?”
Miles believes prices will eventually come down, but by how much? He doesn’t know.
“We’ll have to wait and see if this is just a bump down to a slightly lower level and if that sticks or if pricing falls through the base,” he said.