Perhaps one of the largest issues builders and developers are currently dealing with is the recent surge in lumber prices coupled with the scarcity of lumber materials. According to Nasdaq’s lumber report, lumber has increased 87% since the beginning of the year, which is a staggering increase. However, what is more, shocking is that lumber had only risen 1.6% from January 1, 2020, to July 1, 2020, but then jumped 85.4% from July 1 to August 20! The cause is a result of diminished supplies coming out of the mills due to Covid-19 related shutdowns. At the same time, demand has remained high due to strong residential housing and multi-family construction markets.
The magnitude of this pricing increase is putting pressures on margins for contractors, builders, and developers and could cause projects to be deferred or canceled should these increases continue into the 4th Quarter. The question on everyone’s mind is, when will this end? This is difficult to answer since businesses continue to deal with the pandemic, an upcoming election in November, which always tends to be disruptive to markets, and we are still in the midst of hurricane season, which is becoming increasingly more active. My prediction: if these current levels of price increases continue, housing and construction starts will be impacted before the end of the year. This will bring relief to the demand side, and lumber pricing will quickly return to early 2020 levels.”
Vice President of the Southeast Region
The Douglas Company
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