High Lumber Prices Affect Delaware Home Construction | Delaware News

By MIKE FINNEY, Delaware State News

DOVER, Delaware (AP) – The price of lumber in the United States skyrocketed in early May, when lumber cost as much as $ 1,700 per thousand board feet.

However, Kolby Dukes, manager of Dukes Lumber Co. in Laurel, is hoping for lower prices in the fall and more stability in the lumber industry.

“In terms of future wood prices, which is the best way to generically describe the prices of wood before the pandemic, they were between $ 350 and $ 400, and that’s per thousand board feet of wood,” Mr Dukes said. “They hit $ 1,700 in May.

“It’s absolutely ridiculous. We have never seen this kind of fluctuation. For us, things have been very normal for 15 years. It wasn’t wild swings like that.

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A mix of issues appear to have driven up wood prices, such as pandemic supply chain constraints, the permanent shutdown of many factories during the Great Recession, and dramatically increased demand for new homes.

In addition, many timber supply companies complain that they have difficulty obtaining materials due to a labor shortage, with many truck drivers quitting their jobs.

Mr Dukes said things were starting to improve, but wood still costs twice as much as before COVID-19.

“The market is still very high and people are still building, and I think demand has kept prices high for so long,” he said. “I don’t know in the industry as a whole if demand has slowed down, but we’re still very busy. But that could be because the market has started to soften.

“Overall, the thing to note is that everyone is tickled because the wood has dropped $ 1,000 in the last 10 weeks. But the thing to note is that the wood was $ 350, and now it’s trading at $ 700, so the wood is double what it was before the pandemic, and everyone is tickled. to death. Crazy.”

Mr. Dukes added that oriented strand board is one of the main building materials that has yet to come in price. The International Association of Certified Home Inspectors said OSB has become more popular than plywood in North America.

The price of OSB per sheet 18 months ago was around $ 9, but it has increased significantly to around $ 63 per sheet.

The prices of finished products like doors and windows have also increased significantly.

As for the price of lumber, it exploded on May 7 and is now down but still well above pre-pandemic levels.

“We saw a peak in May, which bled in June, and the wood has become extremely expensive, but now we are seeing prices coming down,” Dukes said. “But May 7 is sort of when it all peaked, and since May 7 – when it was $ 1,700 (per thousand board feet of lumber) – now lumber futures are at $ 700, it therefore fell more than 50% in the futures market.

“Now the futures market takes a long time to translate into the wood coming into our yard and the consumer buying it. What they sell is … their future production, so they sell what they are going to manufacture in September and October, ”he added.

“The price of lumber has fallen $ 1,000 from what will be produced in September and October, so we expect prices to drop rapidly over the next two months.”

Amid the uncertainty in the lumber market, the US Department of Housing and Urban Development and the US Census Bureau said sales of newly built single-family homes fell 5.9% in May to 769,000.

Meanwhile, the median selling price of a new home in May was $ 374,400, up 18% from $ 317,100 in May 2020.

Robert Dietz, chief economist for the National Association of Home Builders, said the slowdown in sales was due to a combination of factors.

“While the higher prices have sidelined some buyers, data from the NAHB survey indicates that about 20% of builders have restricted their sales activities in recent months in order to manage supply chains for materials and the availability of the workforce, ”Mr. Dietz said in a press release. .

“Entry-level buyers are the most affected by the price increase. Just a year ago, sales shares under $ 300,000 represented 44% of sales, while in May they fell to 26%.

The number of new homes sold that have yet to begin construction is up 76% from a year ago. The number of new homes sold that are completed and ready to be occupied is down 33%, NAHB said.

Soaring lumber prices are adding thousands of dollars to the cost of a new home, excluding millions of potential buyers and preventing the homebuilding industry from driving the economy forward, according to the association.

Alicia Huey, an upscale custom home builder from Birmingham, Ala., And NAHB’s second vice president, said the price of her lumber framing package for an identical-sized home had more than doubled over the course of last year from $ 35,000 to $ 71,000.

“This increase has definitely hurt my business,” she said. “I had to absorb a lot of these extra costs and even put some construction on hold because I would lose money going forward. “

The same crackle is felt locally. Maria Lopez had tried to build a house in a community over 55 years old in the north of Dover. However, she said the increase in the price of lumber had pushed up the cost by about $ 50,000, a price she couldn’t afford.

“It’s such a shame,” Ms. Lopez said. “We thought we had found the perfect house, and then this shortage of wood occurs and forces the house we were going to build out of our price bracket. But we are not giving up yet. Hopefully the price of lumber and building materials will soon drop to a more reasonable cost. “

After the lumber price spike in May, NAHB President Chuck Fowke, a custom home builder in Tampa, Florida, called on the federal government to help control price increases.

“The NAHB urges President (Joe) Biden and Congress to help alleviate this growing threat to housing and the economy by urging domestic lumber producers to increase production to alleviate growing shortages and make a priority of ending tariffs on Canadian lumber shipments to the United States which is exacerbating unprecedented price volatility in the lumber market, ”Fowke said in a press release.

He added that May’s price spikes not only sidelined buyers during a period of high demand, but they also brought down many sales and forced builders to put projects on hold at a time when stocks of. homes were already at an all time high.

Mr Dukes said most people building new homes in Delmarva see a financial compromise.

“People come in and the price of their house has gone up by $ 40,000 or $ 50,000 (because of the wood tariffs), and they don’t care because their interest rate is so low that over 30 years , they’re going to save $ 60,000 over what the rates were, ”he said.

“So for them, they get the same deal or maybe even a little better over the life of their mortgage depending on the interest rate. “

WHY NOT CHANGE BUILDING MATERIALS?

While builders have grappled with record lumber prices and supply shortages over the past year, few are willing to abandon traditional lumber.

A June survey for the NAHB / Wells Fargo Housing Market Index revealed several reasons for this, but one stood out above the rest.

More than four in five (82%) builders cited the lack of workers and contractors with the necessary experience as a significant barrier to moving away from timber framing, which remains the dominant construction method for homes. single-family homes in the United States, accounting for 91% of new homes completed in 2020.

The study indicated that the typical framing crew is not ready to immediately start building concrete or steel houses.

After a shortage of experienced workers, the second barrier to switching from timber framing was the relative cost of materials, cited by 42% of builders. Not only do materials like steel and concrete tend to be more expensive than lumber historically, but they have also recently been subject to their own shortages and price hikes.

The costs of retrofitting and reengineering homes to conform to a new construction method, resistance from buyers and difficulty obtaining inspections and approvals from local building departments were also cited by over 25% of builders in the area. houses as major obstacles to the abandonment of the timber frame.

Only 5% of builders indicated that none of the potential issues listed in the survey were a significant barrier.

However, if lumber prices continue to fluctuate, some builders are considering moving away from lumber. In particular, 17% of surveyed builders plan to switch to steel, 16% to structural insulating panels, 14% to insulating formwork and 8% to concrete masonry.

Mr Fowke said something is going to have to be given regarding building materials – and soon.

“It is clear that these price increases are not sustainable, especially in light of a continuing housing affordability crisis,” he said. “In view of this continued period of high demand, the Commerce Department should investigate why the production of lumber producers and sawmills is at such low levels. “

Mr. Dukes agreed that this is all quite difficult to understand.

“I don’t quite understand all of this,” he said. “The demand is certainly high and the interest rates are low. For us, these prices don’t make sense. I have projects at home that I’m not doing because I’m not going to pay that much for the wood because I know what it should be – and it shouldn’t be that.

Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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