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Politics & MoneyReal Estate

How wild lumber prices have crippled homebuilders

Until more lumber mills reopen, expect prices to remain high in 2021

house supply HW+

It was spring of 2020, and Keta Kosman saw a perfect storm about to collide with the lumber industry.

As the COVID-19 epidemic set in, then-president Donald Trump and Canadian Prime Minister Justin Trudeau assured business leaders that, despite border closings, trade would not be impacted. The rail cars that carried lumber from the mills of Canada into the lumber yards and big box stores of America would continue to run unabated.

It proved overly optimistic. For safety reasons, lumber mills across the two countries closed down almost immediately. Supply lines choked just as demand spiked to levels never seen before. And the virus was raging.

“Suddenly, the supply chain was seriously impacted by the social-distancing restrictions put in place for health and safety reasons, especially in Canada,” said Kosman, the publisher of trade Madison’s Lumber Reporter in Vancouver. “Fast forward to 2021, and scheduling delivery times in America are still extremely challenging, which is causing a lot of consternation. Since customers are only ordering the wood they need for actual building projects, the added shipment delays are a real problem.”

Home construction in the United States is heavily reliant on trade with Canada, which has historically supplied more than 80% of the lumber imports to the United States.

Supply chain woes and heightened demand forced lumber buyers, builders and mills to spend hours on the phone to try to confirm orders, often to no avail. With paltry supply, customers had no choice but to pay through the nose for materials. This triggered suppliers of other building materials – gypsum, aluminum, copper – to raise their prices, too.

“Industry players were caught by surprise during the usual building and selling season of summer,” Kosman said. “Despite not liking the asking prices, they had to pay because their projects needed to be completed.”

This is the story of how a pandemic in 2020 tested the operational limits of building suppliers, the patience of homebuilders and contractors, and the wallets of their clients. HousingWire also looks ahead to 2021, which is already showing signs of a rebound.

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