Home Improvement? I Wood if I Could.

As the pandemic hit, many people began home improvement projects that they had been putting off while being stuck at home.  Simultaneously, sawmills and wood processing factories were temporarily shutting their doors.  Additionally, a 2017 20% tariff on Canadian lumber had kept that supply limited to U.S. consumers.  Nonproductive factories combined with existing tariffs are causing the lumber market to climb at unprecedented rates.   By the end of 2020, lumber tariffs were reduced to 9% for Canadian lumber.

As the lumber markets continue to climb, contractors are faced with the challenge of quoting materials as they rise with no top in sight.  Unknown costs are being passed from contractors who are adding price escalation clauses into their contracts to minimize their risk.  “Based on 110,000 board feet of random lengths 2x4s, the Chicago Mercantile Exchange recorded the following prices: April 15, 2020: $324; Sept. 14: $984; Oct. 30: $495; Feb. 22, 2021: $1040; and April 15: $1238.”[1]  Prices on gypsum, steel, copper, and land have been steadily rising in conjunction with the lumber.  Copper is at a record high in 2021.

Lumber prices show no signs of slowing down:

Source: https://www.macrotrends.net/futures/lumber

Along with home improvement, real estate keeps moving at full speed in 2020 and into 2021 while their raw material inventory was being depleted.  “Lumber prices seem to set a new record almost daily, now up 67% this year and up 340% from a year ago, according to Random Lengths, a wood products industry tracking firm.”[2] The spike in lumber prices have caused the price of a new build to increase by $36,000.  With existing homes, they have appreciated in value by over $12,000.  The real estate market is also booming around the country.  Low interest rates have fueled a desire for homeownership.  Those newly purchased homes also come with the want for additional home improvement projects.

Aside from astronomical raw material costs, there is a shortage of truck drivers across the country.  The result of the driver shortage will increase delivery costs if products can be delivered at all.  Over the next 10 years, the U.S. will need over 1 million truck drivers to keep up with delivery demands.

[1] https://www.journal-news.com/news/record-high-lumber-prices-impact-suppliers-new-homes-diy-projects/F5QDFV3RLNFWZACT5KPQZVNU4E/

[2] https://www.cnbc.com/2021/04/30/soaring-lumber-prices-add-36000-to-the-cost-of-a-new-home.html

Written by:
Ashley Clawson

My background that has been split between roles in procurement, operations, and sales allows me to understand my customers' needs in unique ways. I want to exceed my customers' needs every day by finding long term solutions to allow them to develop their businesses.

Guttman Energy Daily Market Update Disclaimer – The information contained in this market update is derived from sources believed to be reliable; however this update could include technical inaccuracies or typographical errors and Guttman Energy does not guarantee the accuracy, completeness or reliability of this update. FURTHERMORE, THIS UPDATE IS PROVIDED “AS IS,” WHERE IS, WITH ALL FAULTS AND WITHOUT ANY WARRANTY OR CONDITION OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY. GUTTMAN ENERGY ALSO SPECIFICALLY DISCLAIMS ALL EXPRESS AND IMPLIED WARRANTIES. YOU USE THIS UPDATE AT YOUR SOLE RISK. This update and any view or comment expressed herein are provided for informational purposes only and should not be interpreted in any way as recommendation or inducement to buy or sell products, commodity futures or options contracts.