METRO DETROIT — First it was toilet paper and paper towels, then cleaning supplies and hand sanitizer.
Now, the latest product to become scarce amid COVID-19 is lumber.
Lumber costs are at an all-time high, spiking over 180% since last April, according to Random Lengths — which provides reports of market activity, prices and other analyses for the wood products industry.
But what’s causing the surge?
At the start of the pandemic, state-mandated lockdowns closed sawmills across the nation, drastically reducing lumber on the market. At the same time, homeowners sheltering in place began allocating money that would have otherwise been spent on traveling, entertainment or dining out to home renovations and do-it-yourself projects.
Brad Upton — who owns the full-service home center and lumberyard Dillman & Upton in Rochester with his brother, Todd — has seen the lumber shortage firsthand.
“During COVID, in states like Michigan, professional contractors were shut down, but a lot of people were getting $1,000 (in unemployment benefits) a week, and it sucked a lot of the materials — the treated and, especially, the white woods — through the big box (stores) that were essential and were open. So when the yards that sell more to the contractors, like us, came back in May, the demand for supplies nationwide was higher than we thought, as things continued to be busy in the home projects with people staying at home,” Upton explained.
The supply, he said, has simply not caught up since then.
“Lumber is a true commodity, so when the demand exceeds the supply, the prices continue to go up. And they’re up,” Upton added. “They are up 100% over the average of the last 10 years, so prices are very, very high. It’s frustrating to us and to the builders who committed to jobs at prices, but we’re unable to hold lumber past about two weeks. It’s all real.”
Larry Oehmke, the sales manager at John’s Lumber — which has locations in Clinton and Shelby townships — said the price of wood typically fluctuates, mostly due to high demand, which he said has been steadily rising over the last couple of years.
“Lumber really took a jump over this past year, and it’s now trading at an all-time high,” he said. “The price of lumber has never been higher.”
The trend has lumber yards across the country struggling to cover their inventory commitments while keeping their budgets in line.
“When you go to the market to find the product and the price is going up, you have to buy it, or miss out on it, before the price goes up even higher. So it can create panic buying, because you can’t have a lumberyard if you don’t have any lumber,” Oehmke said.
Skyrocketing lumber costs are also causing headaches for home builders — like John Bloomingdale, who owns Bloomingdale Homes in Rochester with his brothers Bruce and Eric.
“We might have a project bid and then not actually need to purchase lumber until three months down the road, when we’re ready for it, but the price increases have been so dramatic and unprecedented that it’s difficult, because it creates a big loss. So, the challenge is on the financial end,” Bloomingdale explained. “My lumberman used to buy a train car of OSB (oriented strand board) plywood for about $10,000. Nowadays, it’s about $140,000 — that gives you an idea of how drastic the increase has been.”
Besides busting budgets, the shrinking wood supply is causing material and schedule delays for builders across the nation.
“There seems to be shortages of plywood and 2×4’s, and if we can’t get the materials to a site in time while we are building, then the crew might have to go home for a half a day, so it affects labor, as well,” Bloomingdale explained.
The issue is also having a rippling effect on construction costs and the real estate market, causing home prices to soar.
“The cost to build houses has gone up dramatically — just because of lumber and price increases across the board on drywall and roofing and everything — so we are increasing our prices, too, because we have to. And yet, people are still buying our houses,” Bloomingdale said.
The National Association of Home Builders calculates that spikes in softwood lumber prices during the COVID-19 pandemic have caused the price of an average, new single-family home to increase by at least $24,000. As for existing homes, the median home price in February 2021 saw an increase of about 15.8% — an average cost of $313,000, up from the $270,400 recorded in February 2020 — according to the National Association of Realtors.
Despite the initial sticker shock, new and existing homes continue to fly off the market, Bloomingdale said, due in part to an inventory shortage, paired with historically low interest rates.
“To kind of prove the demand for houses, in some of the spec homes we’ve sold in Birmingham — one we sold to a customer when we were at finished drywall; another one we sold here recently, the house was just being framed; and then there is another that sold when all we had was the basement in the ground. They, of course, can see the drawings and what it’s going to look like when it’s done, but people are buying them,” Bloomingdale said.
With the cost of new homes soaring and limited houses on the market, many homeowners have decided to expand or remodel their current home.
“I’ve been in business for 25 years, and I’ve never had this many calls in a year for that type of work. I think it’s because people were sitting in their houses for a month or two and said, ‘Hey, if this ever happens again, we need more room.’ Or, ‘We need to update this or that,’” Bloomingdale said.
Moving forward, one of the issues homeowners must consider is affordability, Oehmke said.
“The economy is doing well, housing is doing well, but there does become a point when it’s not affordable — especially for a homeowner that wants to do a do-it-yourself project and they get sticker shock,” he explained.
Upton predicts that the cost of lumber could begin to level off by the end of the year.
“Sooner or later, it will drop, and it will drop big — I just can’t tell you when that’s going to be. Sometime this year, the supply will likely catch up with the demand and the prices will soften significantly,” he said.
For more information about Dillman & Upton, visit www.diillmanupton.com or call (248) 651-9411. For more information about Bloomingdale Homes, visit www.builtbybh.com or call (248) 651-6701. For more information about John’s Lumber, visit www.johnslumber.com or call (586) 739-6700.
By: Mary Beth Almond | Metro | Published April 7, 2021