A literal building block for housing, lumber serves as the foundation for everything from homes to mid-rise apartment buildings.
Yet the coronavirus pandemic, which disrupted social norms, routines and the economy, also stalled the supply of lumber just as demand for new housing and home improvements surged — and the market has yet to catch up.
As a result, lumber is scarce and, in a classic case of supply and demand, prices more than doubled in the past year, driving up the cost of building and restricting the availability of new homes. The limited inventory in turn has fueled a run on housing, from new homes and apartments to existing homes on the market.
The cost of softwood lumber, commonly used to frame houses and small buildings, has jumped 112% since April 2020, according to data compiled by the National Association of Realtors. Plywood, meanwhile, has shot up 77% since last year, and other products, like hardwood, have increased 32%.
That’s added nearly $36,000 to the average cost of a new single-family home and $13,000 to the price of a new multifamily home, according to the National Association of Home Builders, contributing to the growing scarcity of affordable housing for first-time buyers and others.
“A $700,000 house is now $825,000,” said Al Procopio Jr., president of Procopio Family Homes in Gambrills, which builds custom homes in the Baltimore area.
A year and a half ago, when Procopio would price out homes for buyers, loose lumber, engineered wood products and roofs would cost about $32,000, $8,000 and $12,000, respectively. Now, it’s double that or more for those materials.
“It certainly is causing people to not be able to afford homes,” he said. “People had a budget, they were already struggling to stay in it, and now they are changing their minds.”
Local and national housing experts called the phenomenon a “crisis” for the industry, well outside the purview of local executives, real estate agents and developers.
“Housing affordability was an issue in 2019, before the pandemic, and this is making the issue much more serious,” said Lori Graf, CEO of the Maryland Building Industry Association. “It makes it more expensive to build housing, and creates more affordability issues.
“I don’t know how we’re going to build enough housing to house everyone in the state of Maryland.”
While some of the trends contributing to the lumber shortage predate the pandemic or run parallel to it, the coronavirus pushed the industry over the edge.
As COVID-19 swept into North America, lumber mills shut down for a couple of months, along with most everything else. As they reopened, demand for lumber soared as people sought to remodel their homes or move to new ones.
With the available inventory of homes for sale already low and mortgage interest rates at historic lows, homes prices leapt upward. Meanwhile, other construction materials and supplies also are scarce, including appliances, fueling the rising prices.
But most housing needs lumber, and there’s simply not enough of it.
The wood products industry said it’s struggling with shortages of labor and equipment even as it faces a significant backlog of orders amid the rising demand. And tariffs imposed by the former Trump administration on lumber from Canada, a major U.S. supplier, are contributing to rising prices.
Brooks Mendell, CEO and president of Forisk, a consulting firm for the wood and timber industries, said mills are churning out a substantial volume of lumber, and new ones are opening. But many are struggling with acute labor shortages and backlogged orders.
“We’re in the fog of war right now,” Mendell said. “It’s like a pipe; there’s only so much wood you can flow through, and if you want to make the pipe bigger, that takes time.”
David Logan, senior economist for the National Association of Home Builders, said production levels at lumber mills have not fully rebounded.
“For an industry such as sawmills that claims to be entirely driven by home construction demand, that is certainly confusing,” he said.
Citing bottlenecks for needed equipment for mills, the American Wood Council said it will be until next year, at the earliest, before the industry starts to catch up.
“Manufacturing expansion projects are a long-term solution that will support increased capacity, but not until 2022 at best,” the trade association said in a statement.
Wood scarcities have dire implications for builders due to how much of it is used in a single project. Usually, wood for any one project comes from a single vendor.
But some builders, like Michael Baldwin, president of Baldwin Homes, said his company is now sourcing from multiple vendors for one house, slowing the pace of construction and adding considerably more administrative costs.
Prices have changed so frequently, and so radically, that quotes may shift even on a day-to-day basis, making them difficult to honor, said Baldwin, who builds throughout Central Maryland. It can take months for a project to get started, especially now as county permit offices also face pandemic-related backlogs.
Baldwin said he’s had to eat the cost for many homes he’s building.
“People in the lumber market continue to surmise that prices can’t get any higher than this, but they do and continue to rise,” he said, adding that a sheet of wood used for roofs and walls has risen from $8 to $52 apiece. “At this point, we are waiting to sell homes until we have a permit in hand and purchase orders have been issued.”
And it’s not just homes. Multifamily developers are struggling with increased costs, too. Projects are delayed and prices are rising, which means rental costs also need to be higher.
The lumber scarcity is just one of several overlapping calamities, said Mark Weisner, president of the Bozzuto Construction Company, the Maryland-based apartment and homebuilder and developer that works under the Bozzuto Group umbrella. He also pointed to a worker shortage and subcontractors busy with large backlogs of work.
Marc Weller, who leads the Weller Development Co., which is developing several apartment buildings in its Port Covington project in South Baltimore, called the excessive demand and short supply of inventory and materials a “perfect storm” in an industry, one that has forced businesses to find other ways to save money.
“All projects like ours have contingencies built in for this exact moment,” Weller said.
As a result, new construction for single-family and multifamily homes fell in April, according to data from the National Association of Realtors, following months of growth.
Yet homebuyers continue to flock to the market despite the lack of inventory and rising prices, in large part due to record-low mortgage interest rates, which made buying a home more affordable even for those borrowing more, housing economists said. Some also benefited from federal stimulus checks, which flooded millions of households with cash as typical expenses such as gas, travel and entertainment fell.
Buyers may be anticipating mortgage rates rising, said Gay Cororaton, director of housing and commercial research for the National Association of Realtors. The drive for more in-home office and leisure space as some people adjust to changing work patterns and routines also is adding to the activity.
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If rates do increase, that will lessen some demand, she said. But until then, the race to buy and sell homes will continue to drive prices higher.
The competitive nature of the market threatens to displace first-generation homeowners, new buyers and those who lost work or income during the public health crisis, exacerbating existing inequities along class lines, said Dee Dee Miller, a Long & Foster Realtor and president of Maryland Realtors.
“Where we are right now, it’s not sustainable,” Miller said. “Until we can figure out a way to reduce costs, affordable housing is going to be difficult.”
She said some buyers are pulling back from potential homes if they need renovations or upgrades due to the cost of lumber and other materials. In a climate with slim pickings, it can make finding a home all the more challenging, she said.
“From the doors to the window frames to the decks, it’s like every product that you are putting into a house, no matter what kind of house, is derived from a wood product,” Miller said. “It’s not going to get any better until we can get some reasonable growth and new construction in areas where it’s suitable.”
Those who can afford to continue to buy, said Tony Schwartz, president and owner of Ritchie Lumber & Building Supply in Brooklyn Park.
“It’s unprecedented,” Schwartz said. “But people are still buying, people are still building. If you need a roof, you need a roof.”