The Lumber Shortage

Lumber is the backbone of construction in American homes, providing the furring in our walls, the flooring beneath our feet and the finish carpentry of cabinetry. This dependency on lumber has greatly increased the price tag for home owners since beginning of the year, with the cost of lumber increasing 3 fold.

Credit: Bloomberg

Multiple factors have converged to cause a steep rise in prices;
Supply of lumber from saw mills has greatly decreased during the pandemic as they anticipated a steep reduction in demand, which we now know has not been the case. As mills try to ramp production back up they also face reduced occupancy restrictions, as well as labor shortages if someone tests positive (requiring contacts to quarantine).

An increased focus on forestry protection in Canada has also reduced the output of lumber to the US as the rate of coppicing woodland became unsustainable. Another detriment to lumber output from Canada since the mid-90's has been the infestation of pines by the Mountain Pine Beetle. It devastated swaths of forrest as their population numbers went unchecked by increasingly warmer winters.

Interest rates continue to be low and this has kept up the demand for new home construction. We've seen first hand the eagerness of clients to improve their homes or get started on new construction and it seems the pandemic has only exacerbated the demand.

As the average personal savings rate of Americans soars (partly due to the reduction in spending), now might feel the right time for many to start their journey though design and construction. Analyst Samuel Burman wrote: "Despite our positive outlook for demand, we still expect the price of lumber to decline sharply by end-2022". 

Realistically speaking we tell our clients to expect to spend at least a year in the design, estimating and permitting stages of a project, with construction starting soon after. As such now would be a great time to pursue the beginning of a project, knowing that when the permit is attained contractor availability will have inevitably have increased and the cost of lumber reduced.

For those who started their journey through the design and construction process this time last year the price tag will have increased significantly. In some cases we've seen clients postpone construction until prices come down, or choose to phase their project. Phasing has it's major advantage of being able to save between stages, however on average it adds 10-15% to the total construction cost due to the multiple set-up, call-out and clean-up costs. With a phased project we still encourage clients to pursue a 'Master Plan', a complete design for all improvements to their property which ensures you don't shoot yourself in the foot by over develop the first phase.