News from the Knoff Group

Feeling the pinch here in our market – new construction prices, already under pressure from the crush of buyers, are being pulled upward because materials costs are so high.

What part of a new house costs 4 times as much as a year ago? Lumber!
by Sabri Ben-Achour Marketplace Money Apr 19, 2021

Demand has been off the charts. You may remember that last week, new home starts reached a 15-year high.

This is happening despite the fact that the price of a key homebuilding material — lumber — is going through the roof.
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It now costs four times what it did a year ago.

Four. Times.

It’s at a record high — $1,326.70 per 1,000 board feet, or $1.33 per board foot.

Here’s why. It is true, a lot of people who’ve been stuck at home decided to fix their homes up.

“We’ve been swamped in the last two, three, four weeks,” said Nancy Kieffer, who runs Moyer’s Sawmill, a couple of hours outside Philadelphia. It’s just four people. They normally cut wood for barns and sheds. Now, contractors are asking for wood to use in homes.

“We had some kind of a contractor. He wanted 3,000 two-by-fours, and I said, ‘There’s no way we can do that,’” Kieffer said.

The whole lumber supply chain wasn’t quite ready for the demand.

“We’re very scarred from what we went through in the Great Recession,” said Stinson Dean, CEO of wholesaler Deacon Lumber.

It took a long time for people all through the supply chain to believe demand was actually going to come back, let alone come back with a vengeance.

“So inventory stayed lean, production schedules stayed lean. You buy exactly what you need for that day, that week, and you do not buy extra,” Dean said.

But even without a pandemic, lumber prices were headed up.

“All COVID did was throw up a smokescreen,” said John Duncanson, the timber analyst at Corton Capital.

He said the average age of U.S. homes is approaching 45, so demand for wood for repairs and remodels has been building way longer than the pandemic has been around. And natural disasters have cut supply.

“In Canada, in particular western Canada, British Columbia, the forests up there have been faced with infestations of mountain pine beetle. Basically killed every third tree,” Duncanson said.

All this put together means Duncanson doesn’t think lumber prices are going to go back to normal. Not anytime soon.

Listen to remainder of podcast here – some interesting points raised about lack of production that started after the 2008 recession – once bitten twice shy mentality has put the supply chain in a bind >> https://www.marketplace.org/2021/04/19/what-part-of-a-new-house-costs-4-times-as-much-as-a-year-ago-lumber/

Source: What part of a new house costs 4 times as much as a year ago? Lumber! – Marketplace