What could cool the hot housing market? Skyrocketing lumber prices and long waits for other supplies
Ricky Bland of Clayton started building a loft in his garage, but when he went to buy the plywood, "the price was rising like crazy," he said.
The price had nearly doubled since the last time he bought plywood about a year earlier.
He decided to wait a few months to see if the cost would go down, but it just kept rising.
Lumber prices have skyrocketed about 250% since April 2020, according to the National Association of Home Builders.
To save money on a chicken coop project, Bland actually bought a pile of used boards with nails in them, "but it's working out," he said.
While do-it-yourself homeowners have been inconvenienced by the rapidly rising prices of lumber, contractors and builders are experiencing a shock to the system, not only because of higher costs but also longer waits on a variety of products.
'It's killing us'
“In 35 years as a general contractor, this year has been the worst,” said Bill Pressley, owner of W.D. Pressley Inc. in Smyrna.
While the prices sting, the shortage of many building supplies is the real pain.
“It’s killing us. Everything is harder to get,” Pressley said. “We have more than 10 jobs we can’t finish because we can’t get the materials.”
On May 5 when he called a company to order subflooring, the employee told him none was in stock.
“Just to get windows, it’s 16 to 18 weeks,” Pressley said.
A white fiberglass shower took four months to arrive.
“When I called about a garage door, they told me if they don’t have it in stock, it’ll take three months,” Pressley said. “I just ordered vinyl siding last week for a house, and we won’t get that until the end of June.”
Another problem is the limited selection.
“For shingles, we were told the company was just producing their top four colors,” he said.
Some suppliers have restricted the amount of materials that can be ordered, so while Pressley may be able to get some of the item, he has to wait to get all he needs.
“Customers can sign a contract for a job and give us a deposit, but I tell them I just don’t know when we can start,” Pressley said. “We’ve actually returned people’s checks.”
Justin Olear, the president of the Builders and Remodelers Association of Delaware, said some members of the association are ready to take drastic action.
“Some … are considering freezing construction to wait for prices to drop, which I hate to hear in such a market,” Olear said. “We have a lot of clients looking to buy, and buy quickly, because their home sold so fast and for more money than they expected.”
Olear is also vice president of operations and construction at Regal Builders, founded over 35 years ago, based in Dover.
“It’s a family-owned business,” he said. “My father is a carpenter, so were my grandfather and great-grandfather. My uncle’s primary focus is in real estate and land development.”
“We have never experienced lumber prices like this before,” Orlear said.
Waiting times for wood and other materials are also unusually long.
“Our windows went from four to five weeks to 10 to 12 weeks – same with the flooring material,” he said.
Because of the delays, a typical six-month timeframe to build a home could be extended by more than two or three months.
He said the situation is “uncharted territory for most of us. If we had a delay before, it was a week or two – not 10-plus.”
Increased costs are forcing companies to increase home prices.
The National Association of Home Builders said higher lumber prices are adding about $36,000 to the price of an average single-family home.
Orlear said the national number is in line with what’s happening in Delaware, but if builders didn’t pass on those costs, they couldn’t stay in business.
“The people getting hurt in all of this are the end-users, our customers,” he said. “It's unfortunate because homes that people could afford six months ago, that’s no longer the case.”
The shortages and high prices are the ripple effects of the COVID-19 pandemic.
“When the lumber mills shut down, it drastically cut back the nation's supply to the highly demanded products,” Orlear said.
Asking for government intervention
The National Association of Home Builders is among dozens of industry groups asking the U.S. Secretary of Commerce Gina Raimondo for help.
In a March 12 letter, they said, “We write to urge your immediate attention to an issue threatening the economic recovery and housing affordability: the price of lumber. We respectfully request that your office examine the lumber supply chain, identify the causes for high prices and supply constraints, and seek immediate remedies that will increase production.”
NAHB CEO Jerry Howard and senior staff members held a virtual meeting with White House staff from the Domestic Policy Council, National Economic Council and the Office of the Vice President on April 29 on mill capacity issues, mill worker shortages and how soaring lumber prices are affecting housing affordability.
One option the NAHB favors is temporarily removing the 9% tariffs on Canadian lumber.
Orlear advocates organized vaccinations for mill workers as one incentive to get more employees to return.
“We need to pump out a ton of lumber products to get caught up. This will help our nation’s unemployment rate as well,” he said.
Reporter Ben Mace covers real estate, housing and business news. Reach him at firstname.lastname@example.org.