Lumber prices, supply shortages and more have turned the local lumber industry on its head
According to the National Association of Home Builders, the price of lumber tripled between April 2020 and May 2021. It has devalued since last summer, but now it is beginning to rise again. Peabody, president of Lumber Mart Inc., estimates the normal cost per thousand used to be around $300 to $325 per thousand units, whereas during the pandemic, it hit a high of around $1,500 per thousand units.
At one point in the pandemic, Trent Peabody wasn’t sure when the beating the lumber industry was taking was going to end.
“This last year has been one heck of a rollercoaster ride,” Peabody said. “The price of lumber reached an all-time high in the industry. It’s never been that high ever.”
According to the National Association of Home Builders, the price of lumber tripled between April 2020 and May 2021. It has devalued since last summer, but now it is beginning to rise again. Peabody, president of Lumber Mart Inc., estimates the normal cost used to be around $300 to $325 per thousand units, whereas during the pandemic, it hit a high of around $1,500.
Then, in fewer than 30 days, it dropped to between $600 to $700 per thousand units. Just like that, the product Lumber Mart Inc. and others bought just a month earlier had lost anywhere from 40% to 47% of its value.
“You just devalued your inventory,” Peabody said. “Take every dollar in your pocket and take 50 cents off of it. It hurts, but it’s part of the commodity business.”
Peabody said nobody in the industry had any idea a crash of that magnitude was possible, let alone going to happen in such a short period of time.
“If you would’ve told me it was going to happen as fast as it did, I would say you were crazy,” Peabody said.
However, Peabody said while crashes like the one last summer hurt, it is still part of the business for prices to fluctuate based on supply and demand.
“We can't really all of a sudden just start running numbers way up because we hope that we bought right, that we have inventory to carry us through, and it's just a hiccup in the market and it’s going to come back on,” Peabody said. “That's what everybody was anticipating with the high run that we had -- that it was just going to be a hiccup in the market, and then it never came up. It ran that way for over 18 months, which is just unheard of in this industry.”
Supply and demand, coupled with large swings in the price of lumber, have caused lead times for products to swell. The local housing market affects it as well. Peabody said the Grand Forks housing market has held throughout the summer and fall months.
“The housing market has been very strong in Grand Forks, and a lot of homes that are hitting the market are not on the market for long periods of time, depending upon the price point at which they’re selling at,” Peabody said.
Material shortages have become prevalent as well. Lumber Mart has had issues getting materials to manufacture windows and doors. It has also faced shortages in steel, which the company uses to make connector plates for its truss plates. The price of steel, in particular, has become an issue, and Peabody doesn’t see it decreasing any time soon.
Production lead times have swelled, too. Peabody estimates lead times have increased from two weeks as a normal benchmark to sometimes 20 weeks or more.
Hiring issues have exacerbated the time it takes to complete projects, as well. Peabody said there are starts and stops on construction because the lack of supplies and workers makes it harder to plan.
“The builders, the electricians, the plumbers and etcetera are having a hard time also filling their roles with staff and being able to handle the influx of the workload that's there, and if there's a high demand for those individuals, then they can demand a premium for their services in order to get things done,” Peabody said.
Peabody remains optimistic through it all. He said there are silver linings to how the price of lumber and other factors have changed the market.
“We’ve got great bank rates right now,” Peabody said. “Grand Forks has a good selection of buildable lots that are for sale. The resale side of homes being in a down inventory, if you put your house up for sale you're probably going to need less time on the market, and you're probably going to get a higher dollar value for rebuilding or selling.”