If you repaired buildings around the farm a year ago and then again this year, you probably don’t need a chart of local lumber prices in June 2020 vs. June 2021 to know they were higher this year. However, you might be surprised by how much higher.
For example, an 11/32-inch-thick, 4-by-8-foot sheet of laminated barn siding cost just over $26 in June 2020 at a big-box store. The same 4-by-8-foot sheet from the same store in 2021 cost just over $35 per sheet.
If you have projects to do around the farm, is now the time? Or should you wait for supply chains to catch up after disruption and prices to settle down? Two industry experts share their views on why prices increased, and what the future might hold. Thanks to Andy Williams, a consultant with the National Frame Building Association, for helping obtain these interviews and this information. Mark Billstrom is with Lester Building Systems and is president of NFBA. Matt Greiner is with Greiner Buildings Inc. and is past president of NFBA.
What are the main reasons for increases in lumber prices during the first half of 2021?
Billstrom: Demand for dimensional lumber and structural wood products far exceeded availability. Early in the pandemic in March and April of 2020, the lumber mills cut production in expectation of a downturn in demand and the economy. The opposite happened. Demand increased. COVID then made it very difficult to reach normal mill output capacity to keep up. The peak construction season that began in early spring 2021 pushed demand even higher; therefore, prices continued to increase.
Greiner: My hunch is that COVID caused major ripples in the economy, and while likely not the only culprit, I’d imagine it’s a primary one. Fewer people in the workforce plus low interest rates plus relatively easy to get loans, etc., has led to high demand in relationship to a reduced workforce, and things have gotten tremendously out of balance economically speaking, regarding pricing and the supply chain. If nothing else, perhaps COVID was the spark, and many other factors have been the heavy fuel to cause a massive fire.
What are the prospects for lumber prices continuing to increase, leveling off or coming down over the next year? What factors will determine trends?
Billstrom: As of early July, dimensional lumber prices had dropped about 49% from their peak in late May. Even with that, prices are still over 100% higher than they were in late 2019, which was when this craziness all began. Structural wood products like plywood, OSB (oriented strand board), LVL (laminated veneer lumber) and glue laminated product prices have not dropped anything like dimensional lumber, but are starting to show signs of decreasing. I don’t know that we will ever get back to the lower and more consistent late-2019 lumber values that we were used to.
Lumber mill output, seasonal demand and demand changes caused by interest rates are all factors. Many have believed that interest rates would continue to be low and minimally changed. We’ll see over the next year if that really happens. The inflation that was not predicted is happening.
Greiner: My thought was that it can’t continue to go up much longer. Who would buy a building with a two-year lead time, for instance? Who will continue to buy not knowing what the price will be at build time? Who will sell not knowing what cost will be at build time? Who can continue losing margins at the rate we’ve seen? I’m not an economist, but this has been my intuition. As a gut feel, I just don’t think there’s enough stability and economic strength around us to see this continue much longer; but then again, the American economy never seems to let us down when it comes to incredible events and circumstances!
Have steel and other building materials increased in cost, as well? For the same reasons?
Billstrom: Yes. Virtually all building material costs have risen dramatically in 2021, for similar reasons. While lumber has shown improvement, steel and all products made from steel continue to have increasing costs. The same is true of petroleum-based products, insulation, etc. Manufactured products like overhead doors, residential doors and windows, siding, roofing products, and kitchen appliances all cost more and take longer to get.
Presently, we continue to get price increase notices from all our vendors and suppliers. Price and lead times on how long it takes to get materials continue to worsen.
Greiner: Currently, steel is a much larger factor than lumber. Anything made of metal is way up in costs. We just saw double-digit price increases last week overnight on overhead doors. Lead times are 10 weeks for windows and anywhere from one to four months on overhead doors. It’s making scheduling and keeping guys busy a major challenge.
As far as the outlook for these materials over the next year or so, if you figure this out, please let me know! Looking back over the years, lumber goes up and down, and metal keeps going up.