Wednesday, September 2, 2020

Will Lumber Prices Stabilize By the End of the Year?

What’s behind the 134% increase in lumber prices over the past 12 months?


The Coronavirus started this upward shot in pricing. State lockdowns of sawmills right after the pandemic started in the Spring caught many off guard thinking the demand for lumber would soften since people were either laid off or working from home.


That slowdown didn’t happen. The $1,200 per person Stimulus Check along now infamous $600 additional unemployment payments in addition to regular unemployment checks allowed many homeowners to do home additions and remodeling by hiring remodelers or doing it themselves.


Lowe’s and Home Depot sales went through the roof with lumber and other remodeling materials becoming scarce. Plus there was the boycott of Chinese building and remodeling materials adding fuel to the fire. You’d be surprised how many products made in China are built into every new home in America.


We probably could have weathered that part of the storm but the FED decided to drop mortgage rates to an all time low. That move brought new home buyers to the table.



Now with new home sales at their best since 2006, Modular builders and their factories began ramping up sales and production. 


Now with DIY’ers, remodelers and new home builders all demanding record amounts of building materials, the law of supply and demand kicked in with a vengeance.


Just since March, the cost of buying a modular home FOB, the factory gate, has gone up about $8 a square foot. This is not only the result of lumber increases but also drywall, plumbing, etc going up in price.


That’s an increase of $16,000 on a 2,000 square foot home. When the builder adds in his gross profit, that brings the actual increase of the home to the buyer up an additional $22,000.


I had someone ask me why the builder doesn’t just pass the surcharge to the buyer with no profit?


The answer to that is quite simple. Have you ever seen construction costs go down after they go up? Do you think the cost increases are over? And do you think the builder’s overhead will stay stagnant?


The answer to all three of these is a resounding NO!


The bottom line is lumber may hit a plateau by the end of the year but the modular factory and their builders will continue to see other materials and new procedures and processes required by health officials to fight the pandemic continue to rise.


Gary Fleisher is a housing veteran, editor/writer of the www.ModcoachNews.com, www.Modular-homecoach.com blogs and the ‘coming soon’ www.ModcoachConnects.com, Construction Consultant’s Directory. 


Contact modcoach@gmail.com


2 comments:

  1. Thank you, Gary, accurately reporting the pressures the current hyper-inflation of lumber products are putting on factory-built housing manufacturers. Add to that supply disruptions and COVID impacts on our own workforce and we have a trifecta of cost adders.

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  2. Just Check the lumber futures market, Lumber is poised for a drop going into 2021. Will the drop result in lower housing prices, no not at first, supply and demand. Interest rates are so low its cheaper to buy than rent.

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