Lumber prices are through the roof
Lumber is soaring, a product, and a consequence, of homebuilding's boom on cheap mortgage money during a housing shortage.
With average mortgage rates still under 3%, maybe homebuyers won't feel the pain quite as acutely, but they'll still feel it. The increases raise the cost of a house by several thousand dollars.
Framing lumber prices soared about 80% since midApril, breaking a record at the end of July, and oriented strand board prices more than doubled from a year ago.
Brace yourself, if you haven't already.
A survey respondent warned in the Kansas City Federal Reserve Bank's August Services Survey: “Lumber market has never seen the meteoric rise in the cost of dimension that we have seen in the past 4 to 6 weeks. Past rallies have developed over a much longer time frame, then peaked out. It will hurt profits for both material suppliers and builder customers that have sold houses to be built at a fixed price.”
It was an alarming note in an otherwise decently encouraging report, considering.
“In August, services activity continued to grow, but also lagged year-ago levels considerably,” said Chad Wilkerson, vice president and economist at the Kansas City Fed, in a news release. “Nearly 75% of firms said government programs had positively affected their business over the past 3 months, but a majority of businesses also reported challenges rehiring furloughed or laidoff employees due to the extra CARES Act unemployment benefits.”
Meanwhile Oklahoma City-area homebuilders kept building.
Through August, builders took out permits to build 3,871 houses, 10.8% more
than in the first eight months of last year, and the most at this point of the year since builders started 3,642 houses through August in 2013, according to Norman-based Dharma Inc.'s Builder Report, which tracks construction in Oklahoma City, unincorporated Oklahoma County, Bethany, Blanchard, Choctaw, Edmond, Midwest City, Moore, Mustang, Newcastle, Noble, Norman, Shawnee and Yukon.
Here's why lumber prices are exploding, neatly bulleted by the National Association of Home Builders:
• “Mills closed in the spring due to stay-athome and social distancing measures enacted by state and local governments.” There went supply.
• “When prices fell between March and April as a result of the COVID-19 pandemic, mills projected that housing would be adversely affected and therefore anticipated a large drop in demand. Accordingly, mills that remained operational substantially decreased capacity utilization.” This was not the only coronavirus sucker punch.
• “Producers did not anticipate the massive uptick in demand from do-it-yourselfers and big box retailers during the pandemic.” How did no one see that coming? Stuck at home, what else were people going to do staring at the same walls every day? Even I've gotten some longput-off honey-do's done, honey.
• “Housing weathered the storm much better than most anticipated.” It depends on who was doing the anticipating. Around here builders and real estate agents and others in the business hardly batted an eye — as they took everything they could online, soaked themselves and one another in sanitizer, donned masks, and kept their distance.
• “DIY demand has not abated much as states reopen and construction demand has far surpassed lumber mills' projections.”
DIY feeds on itself! Once you get started, it's hard to stop.
• “The recent spike in all northern U.S. and Canadian species has no doubt been exacerbated by the lumber tariffs averaging more than 20% on Canadian imports into the U.S. market.” That's a long story. Read about it