If you are looking to build or remodel these days, you may have come across an unpleasant surprise. Maybe you have noticed it: Lead times are longer, prices are higher, and the future development is more unpredictable than usual. There are a number of factors playing into this, but the last person having anything to do with this increase in pricing and wait times is your contractor. Here are some reasons why prices have skyrocketed for construction!
First things first, let’s try to find our main suspect: Lumber. While most basic home construction materials have gone up – on average over 30% — lumber stands out for its ridiculous price increase of about 170%. Keep in mind, that lumber is used as framing in pretty much every major construction project. Okay, but why is it getting so crazy expensive all of a sudden?
Well, you may be sick of hearing it, but the number one reason are Covid and the restrictions that came with it. Sawmills operate with drastically reduced staff and are therefore unable to meet demand, leading to a surge in prices.
Secondly, low interest rates, skyrocketing property values, a booming economy over the last years, and a sudden and significant increase of time spent at home, led many people to decide to remodel or build at this time. This caused a massive uptick in demand and, combined with the reduced output of American sawmills, led to a pricey bottleneck.
Additionally, as part of an effort to strengthen the domestic manufacturing sector, tariffs have been imposed on Canadian lumber. They are currently at 9% and contractors as well as interest groups are lobbying the US government to lower or abolish them altogether. However, as of now, international imports to alleviate our lumber shortage are subject to costly import tariffs.
Lastly, similar to the operational problems sawmills face, ports, warehouses and receiving facilities are all operating with reduced capacity. This means less imports can be handled in any given time. The mentioned American lumber shortage can therefore not be easily alleviated, tariffs nonwithstanding.
As you can see, it’s not your contractor trying to finesse money out your pockets, it’s merely the effect of an overheated demand meeting a diminished supply side. As of now, there is nothing we can really do about long wait times and skyrocketing prices, but as the Covid situation is winding down, the market should cool in the long term.