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Construction prices up industrywide

Just when you thought coronavirus couldn’t possibly interrupt yet another aspect of life, it did. Sure, changes in the healthcare, education, and tech industries seemed plausible—but construction? No way! Who would’ve thought a health virus would affect the price of building something? If you had the foresight to see a year ago that the construction industry would be impacted the way it is today, you’d be one of the few. Nonetheless, predictions aside, ask anyone in construction today about the amount of money necessary to pull off projects and they’ll tell you the reason boils down to the pandemic. The Chronicle turned to Cason DeVane of Swainsboro Supply for a short Q&A session about how the construction business is faring today. Below is his take.

Should you need any help with anything in construction, Swainsboro Supply, your local building supply store since 1945, is open Monday through Friday, 7 a.m. to 5:30 p.m., as well as Saturday from 7 a.m. to noon.

When did you see the prices of lumber begin to go up?

DeVane: Lumber ran relatively flat from about May 2019 through May 2020. It began a steady rise in May 2020 until about October 2020, then it actually went down from then until the middle of December. Starting in the middle of December 2020 until now, it has been on a continuous rise.

What do you attribute the increase to?

DeVane: There are several factors, mostly related to COVID-19. For starters, there was an increase in demand because people at home finally have time to do projects. The DIYers really put a hurt on the lumber industry at the start on the pandemic. Production had been cut back due to the uncertainty of the future and was not prepared for the DIYers that were now home with extra money to spend and nowhere else to go. Housing projects that had been put off for years were now the focus of many of these people.

We also had a stimulated economy, so people had money they wanted to spend, which helped with DIY projects, too.

I also believe the national housing shortage contributed to a degree. There are not enough homes in the country for the amount of people. Conservative estimates say that there is a 2.5 to 3.8 million home shortage in our country. This shortage has caused a ramp up in building of new single family and multi-family homes. Housing starts are up to the levels not seen since 2007. The National Association of Home Builders (NAHB) forecasts that housing starts in 2021 could exceed 1 million for the first time since 2007.

Another reason could be that an exodus from big city apartment living has also led to an increased demand in new housing. Once people were sent to work from home, the mindset began to change. People realized they did not need to live in big expensive cities and began to look for new alternatives in lower cost areas.

We’re also seeing high tariffs on lumber from other countries, mainly Canada. Canada has also put a limit on the amount of forest that can be cut, which hurts the overall supply needed in the times that we are in.

Mill shutdowns due to COVID restrictions and outbreaks helped make prices go up as well. When demand never slowed, all this did was put the already strapped mills even further behind.

Another thing people don’t realize is there’s a resin shortage. The resin plants in this country saw the same COVID-related problems as the mills. They had to run with more restrictions and deal with closures due to COVID outbreaks. The real killer to the resin industry was the winter storms and the hurricane season. Winter storms and hurricanes caused the shutdown and, in some instances, destruction of resin mills in Texas and Louisiana. All of these caused massive disruption to the resin supply chain. About 80 percent of domestic resin producers are in force majeure.

Another major factor is low interest rates. Interest rates are at historic lows, which has led to more people wanting to build.

Lastly, two of the main factors now are a shortage in labor and logistics/freight impact. Mills are dealing with the same labor shortages that every other industry is dealing with. They can’t get enough employees to show up for work to keep up with the demand. Logistics and freight challenges are getting worse by the day. There is a driver shortage. Freight rates have more than tripled in the past year on a standard load of wood to be delivered to the yard. Flatbed load-to-truck ratios are up historic amounts. In 2019 and 2020, the average amount of flatbed loads available per driver averaged about 17 to 25. It is currently in the 110 to 120 range. This means it takes 4 to 5 times as long to get the product delivered.

How long are your quotes to contractors good for?

DeVane: We are currently quoting for 5 days. This is actually better than most in the industry. The industry standard right now is 24 hours. The last few years, a typical quote was good for 20-30 days with some house packages being held for up to 75 days.

Can you compare lumber prices from last year to now on OSB, plywood, 2x4, etc.?

DeVane: I’ll do this based on 5-15-20 price and 5-15-21 price. 2x4x8 pine was $3.70 last year, and it’s $9.75 today. 4x4x8 PT was $9.60 this time in 2020, and it’s $17.75 now. 7/16 OSB ran $9 last year; it’s $41 today. ¾” CDX cost you $22.50 one year ago, and it’ll cost you $70 right now

How, if at all, has this change in the industry affected your business?

DeVane: Building has remained strong in our part of the state. With the amount of people that have been at home over the last year, plus we have seen an uptick in customer traffic by almost 35 percent, we have been blessed to keep a full staff at work and the doors have stayed open the whole time.

Do you foresee any long-term affects to the building industry?

DeVane: I personally don’t see many long-term effects in our geographic area. With talking to counterparts in larger markets, there are several changes that they see on the horizon. Big cities and big markets will see the most change. Areas like Swainsboro where there are no track homes won’t see much change. The track home builders in larger more metro areas will undergo the most change. There is a big push for more technology-driven building. I believe you will see the track home builders do a lot more prefabrication work away from the jobsite.

Are you seeing any shortages of items?

DeVane: Yes, shortages are beginning to play a major role in the building industry. Producers can’t produce material faster enough. Labor shortages are also playing a major role in this—and that’s before you consider the winter storms that decimated the southern and middle part of the country and forced major shutdowns.

Are there any building-related items other than lumber that have been affected?

DeVane: Yes, there are several. As I noted earlier, there is a resin shortage. This resin goes into so many items that it is hard to quantify its overall effect on the building industry. PVC and anything that is plastic is harder and harder to come by because of this. It also effects the wire industry. The cover of building wire also uses this resin. Anything plastic is in short supply. Products such as light fixture covers, plastic wall boxes, paint brush handles, and so many more rely on this resin. There are shortages in all of these. Metal products have been in high demand, which has caused a shortage as well. Copper has seen exponential demand, which has caused skyrocketing prices and short supply. Basically, with all the problems noted above, the best answer is that every item that goes into building a house is in high demand, which has caused all those items to be in short supply.

When do you feel the market will stabilize and begin to go back down?

DeVane: If you ask five people this question, you will get five different answers. No experts agree on any one answer. I have talked with people that expect it to start falling sometime this summer while others have said it could be mid-2022 before we see any downturn. My personal opinion on the matter is that there will be some pullback in the fourth quarter of this year. I think you will see more people starting to spend money on travel and other things they have not done in over a year. This will help ease the burden on the demand side for lumber. If interest rates go back up, you will see a slow in building, which will help drive the price back down. When demand dips, then material prices will follow. I think you will start seeing some of that maybe in the October range, but as I said earlier, there is no definitive answer.

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