New Home Costs Rise Due to High Price of Lumber
Providence, RI, Apr. 26--Piecing together a house is getting more expensive for builders this spring as prices rise on construction materials, according to the Providence Journal. Lumber has returned to the record levels of last year--adding more than $5,000, on average, to the expense of building a house. A number of factors have combined to drive up costs: historically high demand; fewer mills; wet weather; and a shortage of railcars. "They've gone through the roof," Chuck Millard, a Bristol contractor, said of plywood prices. The construction material began to rise about a year ago, dropped late last year and began rising sharply in January. The prices of oriented-strand board, a widely used substitute for plywood, and other lumber have risen along with the cost of plywood. Prices for plywood and other structural panels have doubled or tripled in a year. "Last year was the historical high; we're getting awfully close to it right now," said Jeff Brennan, general manager at United Builders Supply. The national average wholesale mill price for 1,000 square feet of 7/16-inch OSB was $495, compared with $485 for 15/32-inch, three-ply plywood, according to Random Lengths, a Eugene, OR publisher of lumber industry data. It takes about 300 wood panels 4'x8' to build an average single-family home, according to the National Association of Home Builders. There are about 31 sheets that size in 1,000 square feet. OSB is made by pressing long wood strips together using adhesives. The product is cheaper to make and more uniform in quality than plywood, hence its use in many of the best engineered wood flooring products. The increase in the wholesale price of OSB from $6 to nearly $17 in the past year adds more than $3,000 to the cost of a median-sized home of 2,100 square feet. There are about 16,000 board feet of framing lumber in the median-sized home, so the increase over the past year from $283 per 1,000 square feet to $439 represents an increase of about $2,500, according to Michael Carliner, chief economist at the National Home Builders Association in Washington. One reason for the OSB price surge is that production hasn't kept up with the demand as plywood mills closed. "This issue is really one of production capacity," Carliner said. OSB manufacturers curtailed output after two years of low prices in 2001 and 2002. In addition, weak prices led to the closure of four U.S. plywood mills. "I just don't see where the production is to keep up with the demand," said Pat Rooney, of JT's Lumber. "We can't get enough of it." The chief executive of Lowe's said he expects plywood prices will remain high this year. "I don't think you'll see plywood prices come back down," Robert Tillman said at a consumer conference carried over the Internet last month. "The supply is now pretty well managed. There's not an oversupply. There are fewer manufacturers." Sales of panels headed for military outposts in Iraq were a contributing factor to a price spike--albeit a minor one--last summer, according to a story in Random Lengths. The issue prompted so many inquiries that the magazine's publishers felt compelled to issue a statement several weeks ago to dispel the notion that the military's lumber orders were influencing prices this year. The U.S. government bought 24 million square feet of plywood last summer for shipment to the Middle East--but that was just 0.06 percent of the more than 40 billion square feet of structural panels produced last year, the magazine said. "With prices on the rise early this year, the same misconception has emerged," the magazine said. "In reality, simple supply-and-demand factors are at work. The strongest U.S. housing market since the late 1970s is fueling the skyrocketing prices." Single-family home construction set a record in 2003 with nearly 1.5 million starts, according to industry analysts. There's been no slowdown as the building industry enters its peak season.