Lumber prices have seen a steep increase since the start of the COVID pandemic, and recently, they’ve gone through the roof even more. Last week, lumber futures contracts for May delivery were priced at $1,645 per 1,000 board feet. That’s an increase of 60% from the previous month, and an increase of 374% over the past year.
So, what does this all mean for homeowners looking to build new houses or remodel their current with North Jersey Pro Builders?
For starters, lumber futures contracts have had a steady upwards trend over the past 6 years, albeit a slow-moving increase. Prices did drop mid-2018 to around $250 before starting to climb again. Then, COVID hit.
At the start of the pandemic, lumber prices jumped from the $200 area all the way up to $1,000 before seeing a sharp decline right around the end of 2020. Sawmills that were shutdown at the beginning and then reopened up weren’t able to keep their supply up with the booming demand. Since reopening however, lumber prices have been rising exponentially. As of May 6th, 2021, lumber prices were $1,645; the fastest rise in price since World War II when the United States saw a huge housing boom.
As many people switched to working from home, the interest to do home improvement jobs — such as new home offices — has also increased. And, with mortgage interest rates falling, it’s the perfect situation for homeowners to add to their homes.
The material costs of framing lumber account for only 10% of overall cost of any home addition project. Since the start of the pandemic, that cost has roughly tripled. But that’s not all that this effects. Soft lumber is used in trim, windows, doors, staircases, and other building products. Shortages due to factory shutdowns have increased a few other minor costs as well.
There has also been some increase in labor costs due to a shortage of workers. Roofing and siding increased by 32% and account for roughly 4% of the overall cost of a project. Even though there are many other contributing factors associated with price increases during the pandemic, none compare to the stall in lumber commodities trade.
The bottom line is that the overall price increase for a home addition project is roughly 18-22% depending on the size. For every $100,000 spent, we would currently expect to spend an extra $18,000 compared to pre-pandemic pricing.
For those that are following the market, this increase is at its peak and no sudden drop is predicted, but it will eventually decrease overtime. Even though 18% seems like a significant increase, keep in mind that lumber prices dropped approximately half the amount before the pandemic — making the current price increase seem all that more dramatic.
Since 2019, prices have dropped about 10% and had that not happened, the increase during the pandemic would have only increased by about 8%. Throw in the yearly 2% inflation on top of that and the pandemic increase is only a whopping 2%. And, if prices don’t increase over the next year, we will be right on track with the expected 2% inflation for 2022. It is apparent that the vogue of public fear can make the increase in costs seem much more dramatic, just like any other public fear that drives the public’s opinion and decision making.
The lumber prices have gone up, but our prices haven’t.
When we reinvented our business model in 2014, we wanted to be the most reliable source for affordable and quality home improvement projects. Because our experts have been in this industry for over 25 years, our business has survived past downturns in the market and continues to thrive today.
Our continued promise to get the local residents near us in their dream home will not change. Regardless of lumber prices, or any other impact, we are here to continue our mission of offering the most efficient way to bring top-of-the-line home additions to our clients in Bergen or Passaic county, NJ. Like we have done with past recessions and shortages, we have enjoyed taking head-on the current business obstacles this pandemic has presented.
As our past success shows, we look forward to conquering any trend or economic challenges the future may hold by continuing to adapt as we always have.
North Jersey Pro Builders took full advantage of the extra time under lockdown to further reconstruct our business model. Our efforts to getting you the fairest deal and the most efficient service possible is the best approach to chipping away at the 18% overall job price increased caused by rising lumber prices. By renovating even the smallest steps of our backend process and delivery, in most cases, we have made it possible to reduce overall project costs and offset the costs related to the lumber increase. Even though the price increase isn’t sustainable in any way moving forward and a decrease in costs in inevitable, we look forward to showing you how our prices will continue to remain the same.
We don’t strive to revolutionize the construction industry, but our approach is always changing and adapting to the environment we’re in. There are many market shifts in all industries, some that have frightening impact, and some that go completely unnoticed by the public. Regardless of what the future holds, North Jersey Pro Builders will always take the necessary changes to remain current with the times.
We thank every one that has supported us in the past and look forward to working with new homeowners in the future.
Sincerely,
North Jersey Pro Builders
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