After a steady decline since summer, lumber prices have skyrocketed once more.
The prices surged earlier in December to $1,024 per thousand board feet, climbing above the $1,000 level for the first time since mid-June, according to the Business Insider website.
From the Bureau of Labor Statistics’ most recent index, prices of goods in residential construction, excluding energy, climbed 1.8% in November. The average price of all inputs to residential has climbed 17.3% over the last year.
According to tradingeconomics.com’s commodities index, lumber is up 40.5% this month and 32.75% for the year. For comparison, the next closest monthly spike in the “agricultural” category is coffee, up 12%.
Michael Pulliam of RW Allen Construction said the company noticed the decline over the past few months but have experienced the recent spike as much as anyone.
He said that homebuilders are having trouble maintaining their estimates with homebuyers due to the ever-shifting market. And lumber isn’t the only material affected.
Jay Frye of Ivey Homebuilders said lumber is a link in the building material chain that’s become troubled all along the line.
“We’ve seen increases in cabinets, drywalls, gutters and siding… almost anything with metal,” Frye said. “The first of the year always brings increases, but the demand just still far outweighs the supply.”
Frye said Ivey estimators have been offering homebuyers more forecasts than set estimates due to the rapid changes.
“On Trading Economics, it’s showing that lumber will continue to go up and be really high until maybe October,” Frye said. “And even then, the plateau will still be much higher than what we’re paying now. They just can’t make the product fast enough.”
Frye said truckers and construction workers are starting to age out of the industry and retire, and there aren’t enough young workers to replace them. He said that makes it much more difficult to build a house.
The House Working Group on Rising Costs of Construction Materials was organized in mid-May. Georgia General Assembly Speaker David Ralston appointed the group to look into why costs were increasing and to recommend solutions to ease the burden. The working group is authorized for the entirety of the 2021-2022 legislative term.
Mark Woodall, director of governmental affairs for the Association of General Contractors of Georgia, gave a report to the group on Nov. 18. At the time, and still today, his team’s numbers show stark increases.
During a phone interview, he referred to his report for the most detailed breakdown of what is going on and what suppliers and homebuyers can expect going forward.
Woodall’s report states that if a cost estimate was communicated to a homebuyer in April 2020 and materials were bought in summer of 2021, the estimate would’ve risen 28%.
The report backs up Frye’s statement that lumber has not been the only material on the rise since April 2020. Steel mill products (up 111% in this span), copper and brass mill shapes (up 67%), aluminum (up 34%) and plastic (up 30%) all experienced sharp increases from April 2020 to August 2021.
It goes on to say, like Frye mentioned, that “while lumber costs appear unlikely to exceed their May 2021 peak, it is also unlikely that most commodities will soon drop below their April 2020 lows.”
“Lumber has gone through the ceiling,” Woodall said. “The costs are going up higher and creating a tough situation for builders and owners.”
Supply chain issues have plagued the industry just as much as the increased costs.
Woodall said some of the problem has been created by people buying up supply early to try to avoid a shortage, which in turn only accelerates the shortage.
The report forecasts this problem as continuing throughout 2022, with owners and contractors likely needing to come together on price-adjustment clauses to counteract the shifting prices.
“Contractors need, more than ever, to closely monitor costs and delivery schedules for materials and to communicate information with owners before submitting bids and throughout the construction process,” the report’s conclusions reads. “Material prices do eventually reverse course. Owners and contractors alike will benefit when that happens. Until then, communication and cooperation can help reduce the damage.