State of the Industry Hinges on Lumber
September’s State of the Industry Summit covered a variety of topics from the overall market, to banking, education and the political scene. The most pressing issue, however, was and continues to be the extraordinarily high cost of lumber. The Summit was presented by James Hardie Building Products and StrucSure Home Warranty.
Paul Evans, national vice president of millwork for BMC, gave a frank and honest assessment of the situation to Summit attendees. He didn’t see a clear end in sight to the pricing challenges occurring upstream from him in the supply chain. Evans cited the rapid uptick in demand following the lockdowns in March and April coupled with local health restrictions that encumber lumber mill output as major disruptors. He shares builders’ frustrations with high costs and lack of certainty.
The best hope to increase supply, the short term, lies with the federal government according NAHB Vice President of Government Affairs Lake Coulson. “We have to convince the Commerce Secretary and the administration that the recovery hinges on addressing this lumber situation,” he said at the Summit. With housing serving as one of the bright spots in the economy, that’s a strong case for us to make.
NAHB is urging the administration to call on domestic lumber producers to ramp up production to ease growing shortages and to make it a priority to work with Canada on a new softwood lumber agreement that would end tariffs averaging more than 20% on Canadian shipments to the U.S. The Dallas BA continues to urge the local Congressional delegation to do the same and to set higher lumber production goals from sustainable harvesting from federal lands.
“Domestic producers are trying to have it both ways,” said Dallas BA Executive Officer Phil Crone. “They claim they cannot be price competitive with Canada without tariffs, yet they are unable to produce what the market needs and less motivated to because of the price protection provided by the tariffs.”
Consumers are paying a heavy price. Since mid-April the price of lumber has increased more than 160%. This surge is adding approximately $16,000 to the price of a new single-family home.
Not surprisingly, 35% of Summit attendees cited “supply chain disruptions” as their most significant concern going into 2021. This easily led “economic uncertainty in general” (21%) and the “outcome of the November elections” (19%).
Optimistic signs may be emerging though. Futures pricing for lumber have fallen nearly a third and the composite price of framing lumber appears to have hit a peak in late September. It is too early to know if this will result in the kind of relief builders and homeowners need.
NAHB leadership met virtually on Sept. 25 with Commerce Secretary Wilbur Ross to discuss the impact lumber is having on the housing-led recovery. NAHB stressed that between harvesting and mill capacities, the fact that most mills are running at two shifts rather than three is the greater problem.
Secretary Ross conveyed that lumber mills feel that the housing upturn is temporary. “If they don’t answer the bell on demand, it may be,” Crone said.