Demand outweighs lumber supply leading to price increase
The manufacturing of materials were forced to shut down, however builders continued to build and homeowners continued their home projects leading to an issue with the demand outweighing the supply.
DOTHAN, Ala. (WTVY) - The shutdown during the pandemic impacted several industries, one year later and we are just now seeing some of the outcomes. One of them being the increase in lumber prices.
This week News 4 will be bringing you a closer look at the housing market, starting with lumber prices when it comes to building a home.
The Woodpile, Inc. Building Supply General Manager, William Johnson, said the shutdown of the mill is the cause behind this price increase. The manufacturing of materials were forced to shut down, however builders continued to build and homeowners continued their home projects leading to an issue with the demand outweighing the supply.
“The mills have never had the opportunity to catch up, they have not had the opportunity to actually build any inventory,” Johnson said.
In 2020 lumber prices were up between 22 and 47 percent compared to 2019. However those percentages are even higher, now being up by 300 and 470 percent.
“That doesn’t include all of the other items that goes in the home like doors, moldings, trim, cabinets, everything has seen substantial increases over the past year and a half,” Johnson said.
The reason, according to Johnson, supply not meeting the demand.
“We are in a high demand for product so it used to be we would shop around, now it is who has it, who can supply it when we need it, so the prices have just been on a runaway trek over the last year,” Johnson said.
When it comes to building a home today prices vary depending on what builders are putting into the home.
However, Johnson said the amount of lumber going into the average three bedroom home is anywhere from $30,000 to $40,000 more than it was in 2019.
“That is a lot of cost to try to consume for the homebuilder and for us being the supplier of the home,” Johnson said. “So the end user, the new home buyer, the price of your house just shot up about $50,000 without anything different happening to it just because of one year.”
Johnson said they are seeing a decrease in home repair and remodeling projects, but when it comes to building, that is not the case.
“People who are relocating here in Dothan the demand has still driven, homes are still selling, even though there is an increase, we have a lot of home buyers in here that is paying cash,” Johnson said.
However, Johnson said margins have fallen drastically for not only them, but for their suppliers and the home builders.
“Even though we are getting higher prices, we are not making as much off of it as probably some consumers think we are because we are just passing it along with everyone else trying to help ease this problem,” Johnson said.
To allow the supply and demand to catch up closer to each other, Johnson said they would like to see prices plateau, but the timing of that remains uncertain.
“There will be a reset at some point,” Johnson said. “We aren’t sure if that will be early Fall or late Fall but there will be a reset where prices adjust downward, but where that will fall, we don’t actually know yet,” Johnson said.
Johnson said it is not just the material itself that has gone up in prices, the freight on both imported items and items traveling inside of the country have also increased.
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