Like many other families affected by the effects of the pandemic, Deborah Cowles saw this as a great opportunity to improve the look of some things in her centenary home.
But the timing of the desire to replace an aging cedar fence just didn’t work, so Cowles decided to postpone it for a few months until things would go more smoothly.
Maybe smoothly. Inexpensive, no.
“I kept company listings for a year, and when I reached out to the same project and company again, it was more than $ 1,000 more,” said Cowles. “Another company was $ 2,000 more.”
What was worse for Cowles was a contractor’s inability to guarantee the wood she wanted. The companies offered what they had, which wasn’t much.
“It was amazing,” said Cowles. “There was a run on wood.”
Market experts say the cost of lumber – measured in 1,000-foot increments – has tripled or tripled since last year. Unprecedented demand was compounded by low inventory levels due to the pandemic and a weak view of improvement.
Stacks of wood will be stored at an Adams Lumber Company warehouse in Centennial on Tuesday May 4, 2021.
“When the pandemic restrictions kicked in in April and May of last year, sawmills saw what was happening and entire sectors of the economy were on hold. They assumed the worst and looked back on the crisis from 2005 to 2009. “Said Dustin Jalbert, an economist specializing in the softwood market with Fastmarkets, an international commodity price reporter with offices in Massachusetts.
The mills “throttled and cut production sharply, took employees on leave, and the expected slowdown in demand never materialized,” he said. “We all expected the cost of new homes and the cost of renovation projects to cool with higher costs for contractors. But we just haven’t seen it in the market and it’s non-stop. “
With one of the hottest real estate markets in the country fueled by historically low interest rates, Colorado has been at the forefront of a price boom that is not retreating.
“Homebuilders planned production accordingly and then hit COVID-19,” said Ali Wolf, an economist at Zonda, a real estate research firm. “At first the real estate market slowed, but then something interesting happened: the combination of lockdown and more time at home made people realize they wanted to live in a house that suited their evolving needs.”
By December 2020, according to the Zonda’s New Home Pending Sales Index, sales of new home rental contracts were already 43% above the prior-year period.
As a result, 86% of builders report major supply disruptions, as shown by Zonda data, with 96% of them reporting price increases in March and April, with wood costs being the most critical component.
“Sawn timber prices have increased by 250% compared to the previous year,” said Wolf, “which makes building a new house considerably more expensive and drives up prices for consumers.”
Some estimates, including by the National Association of Home Builders, put the additional cost of a newly built home at nearly $ 36,000 – and it’s rising.
“Housing construction was already at its peak, leading to more house rentals and because people began to hate where they lived after seeing it around the clock,” said economist Elliot Eisenberg. “And now, along with all the buildings and conversions, these outer huts are being built so that they are socially distant and the demand for wood is increasing.”
Construction on The Canyons Housing Estate in Castle Pines will continue on Tuesday. September 1, 2020.
The interest rate on a 30-year mortgage averages 3.04%, a decrease of nearly 84% from the 1980s, Eisenberg said.
“Conversely, the price of a thousand plank feet of wood peaked at $ 1,300 today, compared with $ 328 a year ago,” he said. “In 2009 it was only $ 163. Nothing is forever. And I don’t think we’ll see any reversal. “
Although prices continue to rise, demand moves with them, despite other expectations.
“Housing costs are influenced by several factors that are often beyond the control of a builder: land availability, labor shortages, and the price of lumber and other materials,” said Ted Leighty, CEO of the Colorado Association of Home Builders. “When any of those costs go up, it’s harder to get enough affordable housing to meet our state’s demand … and in turn, oust hundreds of homebuyers from the market.”
Leighty said there was a press lawmakers could help with. In March, more than three dozen associations and trade groups wrote to Secretary of Commerce Gina Raimondo to “investigate the timber supply chain … and seek immediate remedial action that would increase production,” a copy of the letter reads.
“Due to the better than expected demand for housing and the unprecedented activity of the do-it-yourself segment, builders are seeing a shortage of sawn timber, which is leading to longer and longer delivery delays,” the letter said. “The potential for living and building to grow and run the economy is limited as long as wood remains expensive and scarce.”
Much of the supply problem is not uniform across the country. The number of trees in the American South is okay. It is the beetle and wildfire ravaged forests of the Pacific Northwest, as well as the burden on the Canadian sector of high US tariffs on their product, that are affecting the supply chain.
“Since maybe the turn of the year, people have realized that the construction industry did not follow the path the global financial crisis took and that it recovered much faster than expected,” said Peter Knowles, executive vice president, Rider Levett Bucknall. a global construction cost consultancy. “Suppliers and producers are not going to return to this normal production quickly, and when the economy recovers there will be more projects on the market.”
The final, said Knowles, should not show itself at least for the balance sheet this year, maybe even longer.
The economist Jalbert is of the opinion that the “positive surge in demand and the negative supply shock” will continue.
“The looming spirit of the past housing crisis, so many of the lumber mills closed and that gives everyone a break, a warning of capital spending,” he said in order to build new facilities to meet demand. “The demand side has to cool down, mortgage rates rise and some homebuyers forced out of the market. The insane prices we’re seeing will come down, but likely not to return to pre-pandemic historical averages. “
For the past 35 years, the Adams Lumber Company in Centennial has served many local builders and a slew of home improvement, said owner Mark Adams.
But the rise in lumber prices is beyond his experience.
“It amazes me that half a piece of wood that comes in paid $ 15,000 for that load not so long ago and now it’s $ 55,000,” he said. “You swallow hard.”
What he also sees is a mad rush for inventory, fueled by bottlenecks in the entire metropolitan area. The biggest flaw: cedar fences like the kind the Cowles guy in Centennial wants to buy.
Jared Feltman is bundling wood on the forklift at the Adams Lumber Company in Centennial on Tuesday, May 4, 2021.
“We get calls from fence builders we’ve never heard of before asking what we have and how much and how they’re going to buy everything without asking a price,” said Adams. “We try to be very protective of our local customer base to make sure we don’t sell them short. But even now, some days it is difficult to find the inventory. Often times it is just not available. “
That puts an even bigger press on local builders who have enough to supply to meet their needs while others don’t.
Anecdotally, the Colorado Association of Home Builders and Adams Lumber say they heard locally that theft of supplies – especially lumber – has increased dramatically.
“It’s all you can do to get hold of that stuff,” Adams said, noting that he had even seen an increase in product acquisition efforts through phone fraud.
For Cowles, that simply means taking a break to see if the new fence is really a home improvement project that she eventually wants to take on.
“We were really surprised,” she said. “The main reason they wait might be that they can’t get the quality of wood that we really want and that the replacement wood they offer has no history in Colorado so we don’t know how it will last. “