Feeling the Pinch of Rising Lumber Prices
First electricity, then gasoline--and now lumber.
The cost of remodeling is going up along with the price of lumber, which reached a 14-month high last week.
“Prices are hot, hot, hot,” said Bob Rhody, a La Canada Flintridge contractor who was busy Thursday trying to lock in prices with lumberyards for a handful of projects he is bidding out. Rhody feared that waiting could cost him an extra $20,000.
Wholesale lumber prices are up about 45% since the beginning of the year, when they reached their lowest in nearly a decade. That can mean remodeling projects or room additions might cost thousands of dollars more.
“The [increase] is not trivial,” says Michael Carliner, an economist with the National Assn. of Home Builders. Carliner said the increase is unlikely to cause a slowdown in Southern California’s booming housing market, but could squeeze homeowners who are “trying to build a new deck.”
But Ben Bartolotto, research director with the Burbank-based Construction Industry Research Board, said further price hikes could discourage new-home building. Southern California housing starts were up 5.1% percent from January to March this year over the same period last year.
An early indication would be if permit filings slow this month for new-housing starts. “These things sometimes take time to show up,” Bartolotto said. “It depends on how real this is.”
The impact can already be seen at lumberyards and home improvement stores across the country.
At Home Depot’s 1,190 stories in the United States, Canada and South America, prices for 2-by-4s have risen about 20% to 25% since February and plywood has risen about 40%. The same is true at Terry Lumber’s 12 stores in Los Angeles and Ventura counties.
“When the market is in the tank for so long and you’re coming up on the [summer] buying season, it’s a real supply-and-demand issue,” said Bob Erskin, Terry Lumber’s general sales manager.
“Nobody really knows how high it will go and when and how fast,” he said. “Volatility is an aspect of the lumber market.”
Lumber prices peaked in early 1993 and then again in the summer of 1999 due to consumer demand coupled with tariffs on Canadian imports of lumber, said Tim Grogan, a senior editor with Engineering News Record, a construction trade publication.
The cost of Canadian wood--which accounts for roughly one-third of U.S. construction, pulp and paper manufacturing--may jump again after the U.S. International Trade Commission ruled last week that tariffs could be imposed on exported Canadian timber because of unfair Canadian government subsidies. Canada is the largest foreign supplier to the U.S., exporting 18.3 billion board feet of lumber in 2000.
Lumber prices began falling last summer and bottomed out in February, due to slow housing starts and because exported lumber from Canada fell short of expectations.
During the decline, some Southern California stores reported as much as a 30% drop in lumber prices over the previous year. Back then, do-it-yourselfers could find bargains on wallboard and lumber for framing and shelving.
But U.S. home construction increased in April--the first time in three months--thanks to the lowest mortgage rates in two years.
“We knew sooner or later that demand would create this,” said Raul Rodriguez, Lowe’s vice president of operations for Southern California.
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Allison B. Cohen is a Los Angeles freelance writer.
