NEW RETAIL STORE MANAGERJune 22, 2021
Managing the fluctuating cost of lumber through the past year has been a wild ride, to say the least. If you’ve been quoting jobs during that time, you’ve likely taken some lumps as the cost of lumber made historical leaps, but to say prices have fallen off a cliff in recent weeks is an understatement. With prices falling roughly 70% from May’s record highs builders and remodelers are finally feeling some relief.
Flashback: How Did We End Up On The Lumber Roller Coaster
Raw lumber seemed to remain prevalent, but the supply chain broke at the mill early and hard in the spring of 2020. Pandemic fears lead to curtailment of production under the assumption that Americans weren’t going to be confident-enough to spend money on their domiciles. The exact opposite happened. Whether it be a new found appreciation of their homes (caused by being stuck there during shutdowns) or the surprising economic health of many households/plummeting mortgage rates, DIY projects, professional remodels, and new home builds all took off. Mills were challenged to ramp up production at the levels necessary to catch-up to this unanticipated demand. According to the National Association of Home Builders, mill output increased just 3.3% while single-family home construction jumped 12% and remodeling activity climbed 7%.
What Made Prices Take A Nosedive?
In simple terms, inventory availability improved.
Life began to become more reminiscent of pre-pandemic life. People returned to work, leaving them less time for home projects. The ability to eat-out, shop, and travel meant discretionary spending was occurring outside of the home, rather than on it leaving lumber on the racks.
Constrained by availability of hardgoods (think windows, cabinetry, appliances, etc) new home starts are showing signs of slowing, too. Homebuilders are facing challenges with finishing a home, so framing is delayed.
Demand started to show signs of cooling, but mills had already developed a healthy surplus as high prices were incentive for production to ramp up.
Plan Your Next Steps
While the market is still higher than pre-pandemic pricing, units of dimensional lumber have approached their bottom. There could be slight downward volatility for 2x8,10 and 12 plus treated lengths for the next couple of weeks, but 2x4’s and 2x6’s likely won’t drop further in the near future.
Sheet goods started dropping about 3 weeks ago and will likely fall fast, too. If you can hold off on large purchases (particularly of OSB) holding off another week or two could be a move that pays off big.
Once the current downward slopes stabilize, another round of price drops are unlikely for the duration of 2021 as mills settle back into a balance of market-suitable price and inventory levels. And while we can celebrate lower prices for lumber now, the ever-looming threat of natural disaster (think hurricanes and wildfires) means you’ll want to keep one eye on the market when planning fall projects.
Outside of the commodity lumber market hardgoods continue to be problematic, though. Across all industries, manufactured goods continue to experience availability, and in-turn price increases. Container backlogs threaten import goods, while labor shortages in both factories and transport operations are driving backlogs for domestic goods. So far in 2021 price increases in building material categories like trim, cabinetry, windows, etc have been received more frequently than those car warranty phone calls. While we anticipate that slowing, prices will be sluggish to show signs of falling and as a result of inflation will never return to pre-pandemic levels. You think that’s bad…..don’t even get us started on steel.