Cohort Takes Another Stab at Getting Washington to Take Action on Lumber

March 16th, 2021 by Drew Vass

A cohort of construction-related organizations sent a letter to U.S. Department of Commerce secretary Gina Raimondo last week, urging Commerce to examine the supply chain for lumber. With lumber prices increasing by more than 180% since last spring, and prices for oriented strand board (OSB) nearly tripling, “We respectfully request that your office examine the lumber supply chain, identify the causes for high prices and supply constraints, and seek immediate remedies that will increase production,” the group implored.

Officials for the National Association of Home Builders (NAHB) say they led the effort, but were joined by another 35 organizations, including the National Lumber and Building Material Dealers Association and The Associated General Contractors of America (AGC). The letter marks one of several efforts in recent months to move federal officials to take action, including a letter sent from members of Congress to President Donald Trump on October 20, 2020, alerting his administration to the issue. “We ask your administration to bring all stakeholders to the table and work to find a solution to address lumber scarcity and subsequent price spikes that ensures everyone’s needs are met,” the letter from Congress read. Four months later, on February 18, 2021, AGC CEO Stephen Sandherr sent another letter urging the White House to take action.

As the U.S. looks to continue its recovery from the economic impacts of COVID-19 and housing remains a “bright spot” for the economy, those efforts are threatened by ripple effects stemming from inflated lumber prices and scarcity of materials, the latest cohort argued. Construction for 1,000, average-sized, single-family homes generates nearly 3,000 full-time jobs, the cohort argued, also generating $110.96 million in taxes. For every $10 million spent on remodeling, 75 jobs are created and nearly $3 million in taxes, they added.

“Housing and construction can do their parts to create jobs, boost the economy to its pre-pandemic strength, and provide safe and affordable housing for all Americans, but in order to do so the federal government needs to address skyrocketing lumber prices and chronic shortages,” the letter suggested.

According to NAHB, the Random Lengths Framing Composite Price surpassed the $1,000 mark for the first time in February 2021 and is currently at $1,035. (The pre-pandemic high was $582.) Since April 2020, spikes in OSB and lumber prices have added $24,000 to the cost of construction for single-family homes, the group said. Over the same period, the cost of the average multifamily unit has gone up by $9,000. Meanwhile, over the last three months, starts for single family homes have averaged 1.2 million at a seasonally adjusted annual rate—levels that haven’t been seen since 2006.

As builders source materials for homes previously contracted, they’re left to absorb any increases in costs that occur prior construction, the group argued. At the same time, “The volatility of lumber prices and the impossibility of pinning down future delivery dates is making it extremely difficult for contractors to provide bid prices or completion times for upcoming projects,” Sandherr said in his February 18 letter.

Increased demands for housing and stronger than usual DIY activities have led to “costly delays in deliveries,” the group said in its letter. Combined, those issues pose significant risks for builders, they said, adding, “many of these firms will be forced out of business.”

Without intervention, the situation could worsen, they said. For the remainder of the year and 2022, analysts for Moody’s project that U.S. construction spending will continue to grow by around 3.2% to 3.4%. While the passage of a multiyear federal infrastructure bill is expected to have profound effects on other building materials, lumber will be least affected, analysts said.

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  1. This upward swing on the cost of lumber is having a negative impact on home buyers, builders and eventually economic growth. Why won’t the government intervene? Is there really a shortage or is there some price gouging and greed at hand? Who is getting fat in this “lumber crisis”?

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