Seattle, WA, Sept. 9--The price of a roof is going through the roof. Ditto the price of siding and framing materials, according to the Seattle Post-Intelligencer.
Wholesale costs of lumber have soared in the past few weeks, driven by the continuing boom in new-home construction, the harsh winter that shortened this year's building season and the military's need for wood for U.S. troops' camps in Iraq. Given that wood accounts for a third of the cost of materials for new homes, the stratospheric increases soon will start to hit homeowners.
"The panel market increases are by far the largest I've seen in my lifetime," said Mike Dunn, an owner of Dunn Lumber in Seattle, who has worked in the industry for more than two decades.
Do-it-yourselfers who walk into some building-supply stores this week will face paying more than $22 a sheet for 4-foot-by- 8-foot, half-inch-thick CDX plywood that until recently was $14 a sheet. A ten foot two-by-four now can cost as much as $5.50, up from about $3.99 a few weeks ago.
"We are at historical highs," said Sam Sherrill, executive editor at Crow Publications, a Portland publication that tracks prices in wood products.
Sheets of wood used for roofing, flooring and siding experienced the biggest price increases. Plywood is up 90.3% from a year ago. Its wholesale cost rose from $268 per 1,000 square feet to $510, according to Sherrill. OSB, or oriented strand board (a composite panel similar to plywood) is up a whopping 152%, from $170 a year ago to $428 currently. Lumber used for framing rose at rates from 46% to 65%.
Lumber prices are up because of typical seasonal demand, and costs for plywood and related items have skyrocketed about 2 1/2 times, Dunn said. Although the Seattle-based company can earn a higher percentage from wood sales when prices increase, not all customers will pay the extra costs, he said.
"People defer purchases when prices go up," Dunn said. "So it isn't all rosy" for the retailers.
Why the skyscraping prices?
There are many reasons, but the main one is straight out of Economics 101.
"The demand is real; it's there; it's huge," Sherrill said.
Housing starts have been roaring along at record highs. Home builders broke ground for 1.87 million new units in July, the most recent month for which figures are available. That's the highest rate of housing production in 17 years, according to the National Association of Home Builders in Washington, D.C. Similarly, low interest rates have prompted legions of homeowners to refinance or take out home-equity loans and begin remodeling projects.
The NAHB estimates that 40% of U.S. consumption of softwood lumber goes into new homes and 30% into remodeling and repair.
Second, the long, tough winter in the East Coast, Midwest and even the South (which had heavy rains) shortened the building season so that in some areas, builders couldn't get started until May.
Other factors include higher fuel costs for trucking lumber around the country and the moribund economy that caused some lumber mills to shut down in recent years.
Jack Hooper, a spokesman for the Defense Logistics Agency in Fort Belvoir, VA, which handles military procurement, said it bought $50 million worth of wood, including 666,000 sheets of plywood, much of it to build bunkers, guard posts and tent flooring for troops in Iraq. But he scoffed at the notion that military buying had caused wood prices to spike.
"I wouldn't dispute that it could be an influencing factor, but we're not a big player in the market," he said, noting that timber is a multibillion-dollar business. He also wanted to set the record straight on another item: "It is primarily for force-protection purposes, not for any nation-building or Iraq reconstruction efforts."
The trickle-down effect has just started to hit builders.
"A lot of contractors who didn't stay close to the market got themselves obligated to a project" with bids based on outdated lumber prices, said Denis Englander, a lumber buyer at Channel Lumber in Richmond, CA, which supplies builders of large projects such as airports, hotels and schools. "Unless they got a lumberyard to hold the numbers for them, they're going to be way upside down on pricing."