Lumber prices: Why houses, remodels, ADUs suddenly cost more

The cost of common merchandise has confused summer plans, and it’s not gas: soaring timber prices make new homes, home remodeling and even simple picnic tables dramatically more expensive.

At times, invoices exceed the quote by thousands or even hundreds of thousands of dollars. In the most extreme case, the project stopped abruptly as prices went wild.

Ken Kahan, president of developer California Landmark Group, said he had suspended work on more than 50 unit apartment projects in the Los Angeles area after timber bids tripled from initial expectations. “When we look at commodities, we do that. Is the world upside down, or is there just a turn that needs to be settled?”

Kahan hopes to resume the project within the next few months once timber prices stabilize, but analysts say prices could continue to rise for a long time due to the COVID-19 pandemic. Said. When the coronavirus began to spread in the United States last year, sawmills assumed demand would plummet and stagnated production accordingly. Distributors followed this lead, stopping the purchase of timber and selling off their inventories.

But the company made the wrong prediction. Many Americans spent more time at home getting stuck, deciding they wanted a change and trying to remodel it. Others, including wealthy renters who wanted more space and gardens, sought a newly built home. Such construction requires a lot of timber.

As there are not enough skilled workers or active factories to process wood, suppliers and distributors cannot immediately undo the impact of their decisions. Greg Kuta, CEO of Westline Capital Strategies, which specializes in timber trading, said:

Timber futures peaked in early May, rising more than 300% year-on-year. Prices have fallen slightly since then, but are still up more than 200% compared to this time last year.

The swelling price may continue for some time. Tony Uphoff, CEO of Thomas, a sourcing platform that connects businesses and industrial suppliers, said:

Part of the problem is that the United States relies on timber from Canadian forests. This is a supply that has been declining in recent years. In 2017, the Trump administration 24% tax For softwood imported from Canada, several Canadian sawmills have been closed accordingly. “It was, in fact, the first step in creating some of the problems we still see in today’s supply chain,” said Uphoff.

Despite the constraints, the construction of new homes continues to increase this year, Hot housing market The developers say they are in a hurry to meet.

However, some builders are starting to slow down.As that choice spreads, it can get worse Supply shortage It’s driving Housing costs For many years. Some have suspended existing projects, while others say it is still difficult to find new deals that work economically given rising timber prices.

For some companies, the big issue isn’t even price. Rather, it’s about finding a supply, whether it’s wood or other staples that are lacking due to a pandemic and devastated supply chain.

Shay BenZvi, contractor and owner of Green Remodeling Solutions at Canoga Park, said he sometimes stepped into the store just to find the distorted and ruined 2×4.

“Many companies have taken out their bad inventory … and they put it on the shelves like people have timber,” he said. “But this doesn’t work.”

At Silver Lake’s Black Cat restaurant, manager Benjamin Schwartz struggled to find an affordable picnic table in the restaurant’s outdoor dining section. When I called a home improvement store such as Loews and looked it up online, I often found a wooden table at two or three times the price I expected.

Finally, he found something within the normal range.

“There are some picnic benches I bought for $ 100, but it was very difficult to get,” Schwartz says.

Among those suspension projects are affordable home developers who have to put together funding from a myriad of sources that allow them to subsidize rent.

Community Corp of Santa Monica, a non-profit builder. Jesús Hernández, Director of Housing Development at Jesús Hernández, said: Continuing at the former pace would significantly reduce the group’s funding and prevent the project from being put together, he said.

Meanwhile, the sharp rise in home prices gave developers of single-family homes the opportunity to continue construction, and some developers said they were able to take over the rise in prices.

According to National Assn. Among homebuilders, rising timber costs have added nearly $ 36,000 to the average new home cost, and some developers are creative in taking over.

When buying a newly built home, the buyer before the pandemic usually signed up on the waiting list and then paid the builder a set price to build the home in a vacant lot in the new home community. However, according to a April survey by the trade group, the majority of builders have “escalation” contracts that allow buyers to raise selling prices after paying a down payment if construction costs rise. I will.

Doug Bauer, CEO of homebuilder TriPointe Homes nationwide, said the buyers weren’t tired despite the price increase and his company could sell homes faster.

He said TriPointe decided to reduce the number of lots for sale to homeowners, rather than an escalation clause. He said it would allow TriPointe to price homes at points that better cover the surge in timber costs. This is a gosslow strategy that reports that more and more builders are adopting it.

Contractor Chris Williams said he has consistently raised the price charged for construction Backyard house known as ADUIncreasingly popular investment in homeowners after the state relaxes development restrictions recent years To alleviate housing shortages. So far, Williams has said that people are paying, but timber prices sometimes move fast and do not allow him to cover his costs.

“If I sign the contract for that amount, say $ 300,000 or whatever, I have to stick to it,” he said. “I just took a hit and raised it to adjust my price in the next project.”

Mike Moore, co-owner of Oceanside SnapADU, needs to raise the price of the company’s ADU by about 30%, raising the typical 500-square-foot one-bedroom model from $ 125,000 to about $ 170,000. I said I did.

In addition to the timber problem, he said the cost of metals, windows and appliances is also rising. Come. ‘”

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