How the Lumber Shortage Impacts the Construction Industry

wood construction building

The varied effects of the COVID-19 pandemic continue to reveal themselves in sometimes surprising ways. Recently, a pandemic-spurred lumber shortage has presented problems for the housing and construction industries, particularly those concentrating in multifamily housing. What should multifamily builders know about potential workflow and supply chain issues during the pandemic?

What’s Causing Lumber Shortages?

Since the COVID-19 pandemic spurred many states to impose shelter-in-place orders in early March, lumber prices increased by nearly 60 percent over just a few months This rapid price increase is due to several supply and demand factors:

  • As the pandemic hit, many lumber suppliers worried about a drop in demand and reduced their production targets accordingly.
  • When states issued shelter-in-place orders with exceptions only for “essential” businesses, some of the U.S.’s biggest lumber mills were forced to temporarily shut down production or operate with a reduced staff.
  • State shelter-in-place orders, many of which were implemented at the beginning of construction season, led to a boom in DIY construction projects, further straining the supply chain.

Meanwhile, home-improvement stores like Lowe’s and Home Depot have posted quarterly sales up over 20 percent. This increase is largely from the greater homeowner and builder demand for lumber and other construction supplies.

Even homeowners with no plans to build or improve in the foreseeable future may see the indirect impact of lumber shortages through higher home sale prices and a hotter sales market. Because the cost of constructing new homes has risen so rapidly and construction delays can seem inevitable, prospective home builders have instead looked toward already-existing homes.

What Should Builders Expect in 2021?

This lumber shortage doesn’t show any signs of going away soon, and with the prospect of additional shelter-in-place or shutdown orders during a possible “second wave” of the pandemic, builders must adapt to these conditions if they are to continue to grow and thrive.

U.S.-based builders can be in an especially precarious position. Foreign supply chains may have a greater ability to source U.S.-manufactured lumber than local businesses that are continuing to deal with pandemic restrictions and economic turbulence. Lumber futures have started to trend downward,  as seen on the Chicago Mercantile Exchange, but current pricing is unavailable in some markets.  

With these factors in mind, builders may need to reconsider or revisit their quoting processes to ensure that they’re properly accounting for future price increases. After all, it’s better to err on the side of a higher-than-usual pricing than to quote a job too low and risk eating any price increases that could occur over the next few weeks or months.

If you could use a hand in sourcing your next construction project, look no further than Live Oak Contracting. Our experts have the industry knowledge and relationships to navigate tricky supply situations, helping builders get what they need at prices that work for them.

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