In March of 2020, American lumber mills curtailed operations, citing both employee health and safety concerns and an expected plunge in demand. As months-long quarantines kept Americans locked in their homes, however, home improvement projects and renovations skyrocketed. The failure of lumber producers to foresee this increased demand for construction supplies has led to widespread lumber shortages, presenting issues to the construction market.
Causes of the Lumber Shortage
As states sought to slow the spread of the coronavirus, many non-essential workplaces shuttered their doors, including lumber mills and wood treatment facilities. Canadian, Chinese, and German lumber facilities — the source of most American lumber — experienced the same work reduction as the United States. And while plants have since reopened across the world, restrictions on operations have made it difficult to catch up to the increased demand for supplies.
This heightened demand is a result of Americans taking advantage of the time at home to tackle DIY projects they have been putting off, such as fences or sheds, or hiring contractors to start a long-awaited remodel. Combined with reduced production, the home improvement frenzy created the perfect storm for a lumber shortage.
For West Coast residents, the situation is even more dire. Wildfires destroyed countless homes and millions of acres of land last year. As communities rebuild, the need for construction supplies is high, but the destruction of timberland has reduced the available resources. From lockdown orders to the spike in home remodeling to Western wildfires, several factors are at play in today’s lumber shortage.
What the Lumber Shortage Means for Real Estate Developers and Contractors
According to the National Association of Home Builders (NAHB), the price of lumber has risen 120% since mid-April, “adding approximately $16,000 to the price of a new single-family home and more than $6,000 to the average new apartment.” Real estate developers have had to pause and delay big construction projects while also spending more money on supplies due to the increased lumber costs.
Independent contractors too have found themselves struggling to find materials and raising estimates to account for the cost of supplies. As the wood shortage continues, many are interested in or already pursuing alternate materials. For outdoor structures and agricultural buildings, contractors are turning to metal framing and tension fabric, respectively. Others are turning to woods like redwood or cedar, as they are relatively affordable alternatives in light of the inflated price of pressure-treated wood. And some are even looking into the engineered lumber market. The NAHB suggests adding escalation clauses to contractors to account for the material cost increase.
Lumber production is expected to return to normal soon. In the meantime, contractors and developers should buy lumber whenever they can, buy in bulk, explore preordering and waitlist options, and shop around different lumber yards and stores.
