Last Spring a 2x4x8 cost me around $3.25. This Spring I’m paying $7.25 for that same 2×4. Lumber prices have gone through the roof and therefore, have me really thinking twice on my upcoming woodworking projects. And I know many of you are feeling the same way. I’ve heard your frustrations through my DM’s over on Instagram. So, this week I decided to step away from my usual DIY tutorial and after several weeks of researching the WHY behind increasing lumber prices, I want to share my finds with you. But along with the “Why” I also want to share the “When” and hopefully give you a little hope for light at the end of the tunnel. Along with the “What” — What can you use in the meantime to get around these outrageous lumber prices?
Let’s start with the WHY. Why are lumber prices up more than 200% since last April and jumping in price as much as 25% per month? A perfect storm.
When the pandemic hit last March, the demand for housing was up due to low interest rates among other factors. With so many unknowns of what we were facing, lumber mills were forced to shut down–in turn, drastically cutting the supply. Now that countless Americans were stuck at home, home improvement projects shot through the roof. Many people were using money that they had saved for an upcoming vacation and instead built a new addition to their home or a new deck, etc…all at the same time, in conjunction with, (as I mentioned before) increased housing builds.
Fast-forward through the rest of 2020 to where we are now and lumber is more expensive than I would have ever thought possible. Another example: A 1/2″ 4′ x 8′ sheet of plywood cost me around $16 last year at this time. Now I’m paying $46 for that same sheet of plywood. And I’ve heard other markets in the U.S. are paying even more than that. (For fun, I just searched a Home Depot in New York for that same sheet of plywood–$79!) Thankful I live in the midwest. All of the sudden my price doesn’t sound as bad. haha!
But why did supply never catch up with demand? So many reasons, where do I even begin?!
- More housing demand….Due to shutdowns and unrest in several large cities across America, people were moving by the droves to the suburbs or more open areas. Along with this, interest rates have continued to stay low. And many chose to move out of the cities and into a larger house with more space to accommodate working from home and even educating their kids at home.
In addition to all of this, more government programs were unveiled to help first-time homebuyers. Due to the high demand of existing homes, for the reasons I just mentioned, new home builds became even more sought after as people found it increasingly expensive to outbid other homebuyers on an existing home purchase. However, the demand for new home builds is decreasing, due to the outrageous price of lumber. The lumber price increase is resulting in more than a $16,000 increase in the mortgage they have to take out. Therefore, many have chosen to hold off on new builds until lumber rates settle down. 1. to save money and 2. so as not to be upside-down on their mortgage when things do settle down.
- Lumber mill restrictions….Because of restrictions due to “cough-cough” (I don’t like to say the word, because it gets flagged, which results in less traffic to the post 🙁 ), lumber mills supply went down drastically and has had a hard time catching up with the demand ever since. Many mills have had to limit the number of employees working to comply with social distancing rules.
In addition to that, employees are increasingly hard to find (across every job sector in America) due to all of the government handouts: stimulus; unemployment; rent moratoriums and the list goes on. Less people are going back to work; especially when they can bring in 70, 80 or even 90% of what they were making. And if they do go back to work, they keep their hours below a certain threshold, so that they can continue to be able to collect unemployment, etc.
Did you hear about the McDonald’s in Florida paying people $50 to come in for an interview? Companies are really struggling to find reliable employees, which in turn, results in less goods being produced which means prices go up. I’ve even heard of people working on the clock for their “allotted” hours and then off the clock for their remaining 40 hours; and getting paid under the table-tax free, of course, so that they can still collect unemployment. There’s a lot of manufactured money out there in the market right now….which brings us to our next reason…
- Value of the U.S. dollar is down….This one is just simple Econ 101. Too many dollars in circulation (printed or digital) lessens the value of our dollar. For example, every time one more dollar is created, each existing dollar is worth less–it will buy less goods/services. And right now, 35% of all dollars in circulation were created in the last 12 months.
As you probably already know, we are looking at massive hyperinflation coming our way. But in the meantime, with all of the stimulus money and other government handouts, Americans are spending money like it’s going out of style (no pun intended). Durable goods sales are up (i.e.: large appliances, furniture, etc) which in turn, results in more pallets needed to ship these goods…yep! You guessed it-that requires wood, which is more demand for lumber…creating one more factor for the price to go up.
But when will lumber prices come down? Well, do you want the good news or the bad news first?
- Let’s start with the bad news…An analyst that I listen to often and has been pretty spot-on in economic forecasting (Economic Ninja) is foreseeing lumber prices starting to come down as early as this summer. So, why is that not necessarily good news? Well, it has to do with the reason why the price is projected to come down. With inflation increasing more and more-eventually leading to hyperinflation-food prices are projected to go up considerably this summer. If you’ve been to the grocery store lately, you’ve already seen prices spiking up. When people are more concerned with feeding their family, they become less concerned with home improvement projects. This in turn, will lessen the demand for lumber, resulting in increased supply, which will lead to lower prices.
- Other experts are saying, we should see some reprieve in the second half of this year…with supply rebounding and the price of lumber sharply declining by the end of 2022. Yes, that seems like a long ways off, but even just seeing a gradual decline will be a breath of fresh air. At this point, a five dollar 2×4 will seem like a bargain. Hence, why we will most likely never see prices back to where they were in 2019. Rarely, do products soar in price and then go back to their original price.
- The bottom line is, no one really knows when the prices will come down, but one thing we know for sure-high lumber prices will eventually come to an end. Once the supply of lumber equals or outweighs the demand, the price will start to come down. This will happen as building slows down and the lumber supply chain catches up.
But what can you do in the meantime to get around these outrageous prices?
In the meantime, one thing you can do to overcome the cost is build with hardwoods. I know that sounds crazy, considering hardwoods have always been the more expensive option. But right now, they’re not getting hit as hard as the softwoods and therefore, they are actually cheaper.
Like I said before, I know this isn’t my usual FUN diy tutorail post. But I wanted to address the elephant in the room, as I know we are all feeling this surge in lumber prices…which makes diy not near as fun as it should be. I’m grateful to know that the prices will come down, even if there are some rocky times along the way. With a little preparation and planning, getting through these possible bumpy months ahead will be a lot easier. Until next week,
Happy Building, Friend!!
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