Indiana and Michigan’s Preferred Home Builder

(574) 210-5951

Industry Insights...

How Lumber Prices Impact Home Construction

It stands to reason that an industry that uses so much lumber for its scheduled projects would be impacted by the rise and fall of lumber prices. For a single-family home, most houses are going to have a wooden frame that ranges in cost from $30,000 to $40,000. Depending on how much the price of lumber rises or falls, this number can and does change. As a main ingredient for home building, if the prices of lumber become too high and we aren’t building homes, then we are impacting not just the lumber market but also all the other markets that go into home building. If no one is building homes then no one needs concrete, drywall, windows, roofs, carpeting, or appliances. This hurts more industries and more jobs.

Why are lumber prices so high?

Simply put, supply and demand. The USA has a lumber shortage due to the effects of COVID-19 on our and our supplier’s economies. Most of our lumber comes from sawmills up in Canada. When covid came and the world had to stop we all knew that there would be an impact. Within the USA, we had a higher demand for housing from 2020-2022. So, wood prices drove up because Canadian sawmills weren’t producing as much lumber as necessary. Our supply went down, our demand went up, so the price went up with it, requesting a higher price for the same amount and quality.

This also causes a breakdown in the supply chain. When we have a breakdown in the supply chain we often run into higher costs. Supply chains continue a normal exchange of so many products for so much rate. This rate is lower than the open market as it creates the chain and a pretty steady flow of money and product. When this piece of the chain breaks, we then have issues selling or purchasing the product. The open market is often not kind, and companies will pay premium prices.

It’s also suggested that personal DIY demand had a part to play in the need for lumber. Home improvement stores like Lowes or Home Depot struggled with how many people were starting or taking the time to finish projects around their homes as covid kept everyone inside. Now that the lasting effects of covid have worn down and people have returned to normal day-to-day life, there has been a decrease in the personal need for wood. People spending more time out with other entertainment has helped with high demand and relaxed the tight prices.

Thankfully the lumber prices are starting to go back down, but this is rubbing against the issue of interest rates. Regardless of the lumber prices, someone has to pay for the projects, and with an exceptionally high-interest rate, it can be difficult to get the same house that you could have with lower rates. Construction companies themselves need their loans to purchase things and pay workers, and of course, consumers need the loans to pay their contractors. The relationship between banks and the consumer now has some friction in yet another way.

What else can impact home construction?

Another huge impact on construction workers is the weather. Unfortunately, there are weather conditions that are not suitable, and winter weather is one of them. Homes can be delayed and timelines can get off track due to too much snow, frigid temperatures, high winds, rain, and anything in between. The condition of outdoor workers is monitored for safety reasons and over health. Cranes and large equipment cannot be operated in some conditions, and there are several hazards involved in construction without throwing ice or water into the mix. Be patient with contractors working on projects as they have the well-being of their men to take into consideration. Likewise, large storms can affect supply chains and make deliveries and products impossible to get to or prepare. Building a home takes the coming together of many different supplies and correct timing, but the weather will remain aloof.

Great People.
Hard Work.
Amazing Results.