We're in the middle of an unprecedented time where, in spite of the COVID pandemic, people are spending large amounts of money to improve their home because they're spending more time at home than they have in many years. As you're making your home more livable and visiting your local home improvement stores, you're probably finding that your buying power has been significantly reduced from what it was a year ago. Lumber prices have been gradually growing over the past few years but hit an enormous spike thanks to the pandemic and for reasons people could have never foreseen.
It would've seemed logical that the housing market would take a hit because many homeowner's incomes were affected dramatically by the pandemic, so mills cut production in anticipation of this potential decrease. But to everyones surprise, demand for lumber skyrocketed. Mill workers were laid off or quit working because of the pandemic. In this labor shortage, mills have struggled to keep up with production because they are still running at only 50% capacity to accommodate COVID regulations.
Another reason that the lumber prices are soaring is that the cost of imports via tariffs have increased. Former President Trump's "America First" economic policy, his attempt to reduce trade deficit in the U.S., implemented these tariffs that are partially responsible for astronomical lumber prices. These tariffs have caused trade wars that are costing taxpaying Americans $57 billion annually.
One of the biggest importers of lumber to the U.S., Canada, was hit hard with forestry issues due to climate change, increasing prices even more. A series of unusually high temperatured winters has failed to kill the mountain pine beetles that plague the tracts of forest in Canada. These bugs kill the trees making them useless for lumber production.
The mountain pine beetles cause the trees to produce more pitch, a highly flammable substance that proved to be more dangerous than the beetles themselves. During the hotter months, Canada had experienced record breaking forest fires that cleared 2.5 million hectares of forest land.
Increased lumber prices have added about $36,000 to the price of building a house, but fortunately added about $13,000 to the current market value of a new home. Prices of lumber are up 67% this year and up 340% from a year ago, while supply is down 20% from a year ago. This spike affects not only lumber framing but cabinets, doors, windows, and flooring too.
Above is a graph from forest2market.com, showing the dramatic increase from previous years into 2020.
In spite of the bleak situation with lumber prices, there is hope in the long term for the housing industry. According to www.homebuyinginstitute.com, an increase in housing prices is forecasted into early 2022 which will help offset the lumber
prices that are causing such havoc in the current cost of remodeling and building new homes.
If you have a home project you would like to get done before the prices increase again, give us a call at 209-772-9200 or toll free at 800-498-1833.
Sources: https://www.reddit.com/r/funny/comments/m8ucc1/the_price_of_lumber_is_too_darn_high/
https://www.nationalbusinesscapital.com/lumber-prices-2021/
https://www.theatlantic.com/science/archive/2021/04/climate-origins-massive-lumber-shortage/618727/
https://www.cnbc.com/2021/04/30/soaring-lumber-prices-add-36000-to-the-cost-of-a-new-home.html
