Amid the COVID-19 Pandemic, the price of lumber products are becoming increasingly more expensive and hard to find on the Outer Banks of North Carolina. The wood deficit caught home builders and their clients by surprise. Construction professionals are finding that lumber prices have nearly doubled their original costs from the beginning of 2020.
The sudden increase poses major implications for the home-building industry. Many construction companies are halting their contract pricing and postponing project start dates until the prices come down. As America continues its major housing shortage crisis, new home buyers may feel the aftershock of skyrocketing timber prices.
Where’d the Wood Go?
When Coronavirus reached the United States, wood prices originally dropped. Construction companies halted production, leaving lumber mills with excess supplies of wood. Many mills stopped their operations completely as the economy went into hibernation.
People stuck at home redirected their funds towards home improvement projects. Instead of traveling and fancy meals at restaurants, consumers rerouted their funds for new decks, home remodeling, and renovations.
Increased demand in lumber products for quarantine projects made sawmills and factories ramp up their manufacturing. Reopening mills with new social distancing guidelines led to a decreased output in product. Some workers contracted COVID-19 on the job, limiting the mills’ workforce.
Panic buyers bought up whatever wood products were left, just like they did with the toilet paper at the beginning of COVID-19. Speculators, sensing a market opportunity, purchased whatever was left of the commodity. Their purchases left little leftover for new home buyers.
What COVID-19 Means for Buyers
The strong real estate market is one thing that’s helped the United States economy bounce back from COVID-19. Although increase in demand and prices are generally a good thing for business, many construction professionals are worried about the long-term impact if the lumber shortage continues.
Since the start of the pandemic, the price of pressure treated lumber rose 250% at one point. Prices for plywood increased by up to 130%. Coronavirus price increases over a short period of time could have negative effects on affordability for prospective buyers.
Framing lumber accounts for about a fifth of total construction costs. Experts suggest the sudden price increases won’t affect high-end builds, but could derail the middle range market for affordable new homes. Americans already under contract for new homes could see price increases in their already under contract builds.
When Will the Price Go Down?
Because of the increased demand and skyrocketing prices, construction contractors and home buyers are scrambling to keep their contacts viable. At some point, builders may no longer be able to absorb extra costs and will have to pass them on to the buyer.
Builders may now look to renegotiate their contracts with buyers. The National Association of Home Builders states the increased cost of lumber will add about $16,000 to the price of a new home. Buyers may be able to reduce the cost of their home by reducing the structure size or pushing off finishing upgrades like countertops or flooring.
So, What Now?
Ultimately, if you can wait to build your new home, wait. At some point this year, there will be a market correction and prices for lumber products will decrease faster than they went up. As construction projects slow during the winter months, the industry will start to see resemblances of normalcy.
At Premiere Contracting, we provide the highest quality construction services to our clients at a reasonable price. If you’re looking to build a new home on the Outer Banks of North Carolina during these uncertain times, we’re here to help. We’re able to adapt to setbacks and help you find reasonable alternatives for your project.