The price of lumber is skyrocketing! It resulted in serious problems for individuals working in construction, woodworking, and DIY industries. But why did and still the cost is rising so dramatically? Many factors contribute to the skyrocketing cost of lumber. Here we’ve discussed the core ones.
Pandemic & Economic Crisis
The pandemic severely damaged the US economy, forcing many sawmills to stop operating. Many people anticipated that the housing market would experience a decline. The housing slump never materialized, of course. The exact opposite took place. Lumber is a highly sought-after commodity, and there is not enough of it available to meet market demand. The demand for lumber far outweighs the supply. The material price skyrocketed within the first 13 months of the pandemic, and the current predicted growth is around 500%.
The price of a typical new single-family home increased by $14,345 and the market value of a typical new multifamily housing increased by $5,511 as a result of changes in softwood lumber prices between April 2020 and July 2022. According to the most current Census Rental Housing Finance Survey’s average rent-to-value ratio, tenants must spend $51 more per month on average to rent a new apartment due to the increase in building costs and market values for multifamily structures.
Increasing Demand & More Import
While domestic production once met the demands of the U.S. market, imports now account for the vast majority of the industry. Not all the States produce lumber meeting their increasing demands, causing lumber scarcity. For example, the British Columbia alone produces 30 percent of all lumber used in the U.S. As a result, lumber prices have spiked across the country, and consumers are bearing the brunt.
A high demand for lumber will increase lumber prices. Moreover, the supply of lumber will continue to diminish if the market is oversaturated. The high cost of the wood also makes it hard to find. Furthermore, it’s not just the demand for the product that drives the price up. It’s also the limited supply of the raw material. If you don’t buy it locally, the price will be higher.
Inflation & Sawmills Production Cut
While the relative value of the U.S. dollar has affected the price of foreign wood, the global economy hasn’t. Inflation and shipping bottlenecks at naval ports are contributing to the high price of lumber. As demand for lumber is growing, lumber prices will likely continue to increase. Because of the high cost of raw lumber, sawmills cut production and unloaded their inventory ahead of the spring housing boom. Because lumber mills have been unable to keep up with demand, they’ll continue to raise prices and reduce lead times. This will cause lumber prices to increase even more, so consumers should expect to pay more. This is like a vicious cycle!
Lack of Labor
The lack of labor has caused lumber prices to rise across the country. While some logging companies are subsidizing their workers, the Canadian lumber industry enjoys lower costs due to the government’s subsidized industry. Despite the subsidized Canadian lumber industry, however, the price of lumber is still too high because of its price. This is why it is so expensive. Its supply is limited and the demand is high.
The lack of truck drivers means that the price of lumber has been increasing for months. The shortage of truck drivers in certain countries has caused the price to increase. This has made lumber more expensive. Additionally, the shortage of workers has led to lower prices for the commodity. As a result, it’s becoming harder to find the wood that you need.
Is Lumber Going Up Again?
While the current state of the lumber market is a little stable after spike in the just-gone Spring, experts predict that it will rise again in the next spring. Throughout 2020 and 2021 it was spiking. The prices of lumber rose to record highs in May and June and stabilized over the summer and fall. Although a price decline was seen at the end of 2021 and 2022, it never went back to pre-pandemic level and experts believe that lumber prices will soon begin to climb again. Despite the upcoming winter, many experts are predicting that prices will rise again in the spring of 2023 like it happened in 2022 spring. This will likely be a result of the doubling of duties on lumber imported from Canada.
Are lumber prices back to normal?
In the last couple of years, the global economy was suffering due to the pandemic and bad wildfire season, which caused supply chain disruptions. Since then, lumber prices have rebounded and are are no way back to normal as it was in pre-pandemic stage, although the economy tries to recover after a debacle. However, all the stakeholders expect the supply chain should be functioning properly and would return to normal prices soon.
Will the price of lumber go down?
Considering rising inflation, there is no way to predict the price of lumber in the near future. Consumer prices will continue to rise, and this will affect the affordability of new home construction. Meanwhile, the cost of building materials is also on the rise. In November, the Federal Reserve reported that the price of lumber rose 6.8%, which is far above the five-year average. Inflation is hurting household budgets and leaving potential home buyers with less disposable income. This trend may continue and never go back to pre-pandemic levels.
If you’re in the market for lumber, you should consider this factor when planning your next home build or remodeling project. The high cost of lumber will affect your construction budget and homeowners insurance premiums.