Reasons for High Lumber Prices
There are multiple reasons associated with the rise in lumber prices all over the world. In this article, we will be highlighting some of the reasons for the steady rise in the price of lumber.
Lumber prices have gone up over the past few years all over the world. Though it was increasing steadily over the past few years, the price increased rapidly in the course of the last few months in 2020. This can be attributed to the global pandemic that has been wreaking havoc on economies and businesses all over the world. The lumber prices have gone up by 130 percent and that has also simultaneously increased the cost of single-family houses.
There is an increase in demand for lumber due to the rise in construction work all over the world. This can be attributed to the growth in the Gross Domestic Product of many countries. Apart from this, several other factors have contributed significantly to the increase in lumber prices.
Additional read: How to buy quality Lumber?
Read on to know how the rise in the price of lumber will affect the cost of housing worldwide.
Why are Lumber Prices High? (+Top Reasons)
1. Increased Demand
There is a steady increase in demand for lumber all over the world. This demand has grown exponentially over the last couple of years. The supply has not reached the level of demand and hence there is a gap between supply and demand which is leading to a rise in prices. There is a construction boom happening all over the world due to the rise in Gross Domestic Product in many countries. This has increased the construction of houses leading to an increase in demand for lumber.
2. The Pandemic
Due to the pandemic, lumber prices have gone up simply because lumber was not available for supply easily like before. Since there were lockdown and fewer people were opening their businesses, the supply was also less than before. During the pandemic, many restaurants and food joints are making outdoor seating arrangements for their guests. This has led to the rise in demand for lumber which has significantly increased its price.
Hence, the rise in lumber prices happened.
3. Lumber Production
Lumber production has also become very expensive. Labor, containers, transportation, and other associated costs have gone up. This has increased the cost of lumber regardless of the demand and supply scenario.
4. Shutting Down of Other Industries
Home goods and paper manufacturing are some industries that have seen downturns and this has reduced their requirement for lumber. Raising the import duties on lumber in different countries has also led to reduced exports. This has led to less supply of lumber and hence the price rise.
Additional read: Tips to choose and buy wholesale lumber
The Current Lumber Prices
Lumber prices in some countries have doubled and tripled since last year all over the world. OSB board prices have gone up in September 2020 thrice than what it was in September 2019. The other associated prices have also gone up. Western SPF 2x4s has risen to 158% from 2019.
The Forecast of Lumber Prices
Lumber prices are expected to remain high throughout 2020. This is due to the chaotic situation that happened due to the global pandemic. Experts feel that costs will come down after this. Since Covid-19, things have become unpredictable and uncertain. Several things have to happen for the price to come down. For instance, in the US, the production of lumber has to increase to cover the loss of supply from Canada.
The shutdowns in the lumber industry also have to come to an end. The timber producers also have to increase their production to bring the price of the lumbers. If these things will start to happen, there will be a fall in lumber prices. This will all depend on when our lives will return to normal. Since no one knows when that will happen, no one knows how the prices will be affected.
Additional read: Guide for Buying Lumber from a Disrtributor
Lumber Prices Affects Housing Cost
For a builder, the rise in lumber prices is bad news. With the rise in the price of lumber, this means that the housing cost will go up and the mortgage cost will go up as well. It has been found that the price of single-family homes has gone up by $16000 on average. However, the important news is that the buyers are agreeing to pay this even high price.
Even in 2017 and 2018, housing prices were also going up. It was 7% for the single-family houses. However, in 2020, it has gone up by 17 percent.
The mortgage rates are very low during the pandemic and this has led to the steady demand for houses among the buyers. The lumber prices which have gone up very much due to the pandemic are expected to come down as soon as this ends.
There is a demand for new single-family homes among the customers despite the global pandemic that is going on. This will mean that the construction builders will be able to withstand the volatility in the lumber market and build homes for the customers who are willing to buy homes even in this situation.
Additional read: Difference Between Buying Lumber at Lumberyard and Big Box Store
There are multiple reasons for the rise in lumber prices. However, the most dominant one in recent times is the pandemic. Once the pandemic is over, it will be easy to determine the fate of the lumber prices in the world.
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