It started with toilet paper and bleach wipes. Then came price surges in Bitcoin, silver and even puppies at one point. Now many are being confounded by a spike in a commodity few ever really think about: wood.
Lumber prices have tripled since June 2020, soaring to more than $1,300 per 1,000 board feet. This has meant some serious sticker shock for many who were planning home-improvement projects this spring and summer.
It has also had a knock-on effect on the booming U.S. housing market. Elevated wood costs have added more than $24,000 to the price of the average new American house, according to the National Association of Home Builders.
In what may be a first, lumber prices also i nspired a TikTok video.
Why is this happening and what should you do about it? Here’s what analysts and a financial planner have to say:
Blame a labor shortage, a lockdown logjam and house hunters
The lumber industry has been struggling with a labor shortage for many years. The number of loggers in the U.S. has dropped almost 40% from 20 years ago, according to the U.S. Bureau of Labor Statistics.
Many jobs have been automated. Some of those that remain are dangerous and low-paying. So just as wood is more in demand, there isn’t an adequate supply of workers. This means producers can’t create as much timber as the market wants, which bumps up prices.
Lockdowns last year also meant that large parts of the industry — including sawmills — sat idle for months. Suppliers didn’t have time to replenish their stocks during the winter as they normally do.
This was all happening, of course, as consumers were looking in increasing numbers to buy new homes, which rely heavily on timber. Add to that do-it-yourselfers looking to make home improvements.
So if you’re in need of timber but are put off by the price, what should you do?
Don’t let this become an impulse buy
Timber is probably not the first thing that comes to mind when you think of an impulse purchase. Yet people who are making a big lifestyle move or upgrade may find themselves torn. Should they just take the plunge at sky-high prices? Or wait?
Of course, some people can’t wait to make necessary repairs. And not everyone is willing to put their life on hold to wait to move into a new house — with an uncertain housing market that could push up prices to a point that would negate the wait.
But for consumers who don’t absolutely need to work on wood-related projects, Dana Menard — the founder and CEO of Twin Cities Wealth Strategies Inc. — says it most likely makes sense to sleep on it, at the very least.
“If you only need three or four two-by-fours, it’s probably not going to hurt you too much,” he says. “However if you’re finishing a basement or putting on a deck, the current price is going to be quite inflated.”
Think about other materials
Does it have to be cedar? Or would a composite wood work just as well? Menard recommends giving a serious think to other, cheaper products if your work needs to be done right away.
There’s even a chance you might be able to find a non-wood substitute such as a plastic or metal, which could bring down the cost of your project.
Prospects are looking up, later
Despite the spike, at least one analyst says he sees a price drop by the end of the year.
“Even though we expect lumber demand to hold up well for some time, we still think that a rebound in supply will lead to a sharp fall in the price of U.S. lumber over the next eighteen months,” Capital Economics commodities analyst Samuel Burman wrote in a recent note.
— With assistance by Marcy Nicholson
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April 24, 2021 at 02:10AM
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Lumber Shortage: What Expensive Wood Means for Home Prices - Bloomberg
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