After the Summer of 2021, it seemed like lumber prices were finally settling down and becoming less volatile. That abruptly changed when Russia invaded Ukraine. Almost overnight, the pricing of 1,000 board feet rose to above $1,400 – levels that have not been seen since last May.
The average home takes 16,380 board feet for framing alone, meaning a $1000 increase in price from the usual $400 results in a whopping $16,380 boost to lumber costs for a home. That’s not even accounting for the lumber that is used as plywood for sheeting, subfloors, and lumber used throughout the house in cabinetry and flooring.
What is behind this rise, when will volatility settle down, and what can be done to curb the rising cost of lumber?
The Rise in Lumber Prices Has Multiple Causes
Russia is a significant exporter of lumber products globally. They account for 21% of global sawn wood exports in 2020. Because it is such a prominent exporter, sanctions imposed on Russia will impact the market for lumber worldwide, even if Russian imports do not constitute a large proportion of our direct imports.
There is demand for new residential developments in all sectors, including single-family homes, multifamily developments, and build-to-rent communities. Other areas of commercial development are also booming, though they are not as heavy consumers of lumber.
At the end of 2021, the market had a demand for 5.8 million more homes than existed. This gap spurs builders to start more housing projects, and indeed, the data shows that they did. Housing starts in 2021 were up 13.4% from 2020. That housing gap will not be met in the short term and will create upward pressure in lumber prices for years to come.
On November 24th of 2021, the US Government imposed an increased tariff on imports from Canada. The tariff increased from 8.99% to 17.99%. This amounts to a 9% increase in lumber prices imposed by the US Government on lumber imported from Canada. Canadian softwood imports account for 83% of total US softwood imports.
It has also taken longer than expected for supply chains to return to normal after economic shutdowns relating to the pandemic. While measures imposed by governments are not impacting production as much as they did when shutdowns were widespread, the rebound in output has been slow.
There is no end in sight for the lumber price fluctuations in the short term. Further, with the war in Russia, the spring building season approaching, and supply chains in Canada slowly restoring after years of Covid policy, it could take a while for pricing to even reach equilibrium.
Methods to Reduce Costs Amidst High Lumber Pricing
For all the reasons mentioned, it’s a good idea to consider ways to reduce lumber costs when building a new home, addition, or significant renovation.
The best time to think about your options to keep costs under control is in the design and planning phase of building your home. Here are three options for saving money on lumber to consider:
Steel Framing Offers Attractive Solution
Traditionally, steel studs cost more than timber studs. However, steel studs can save on both material cost and labor. In part because they weigh less for the same applications. In addition, they come pre-drilled for running wires. This cuts the total cost of the construction project.
Using fewer traditional lumber materials can reduce the overall cost of a new build. SIPs, or Structural Insulated Panels, offer a great alternative to traditional studs, sheeting, and insulation. While the panels are more expensive than lumber alone, they can reduce the overall build cost. They also save time in the labor in framing and insulating, shortening the building timeline. A project that gets completed faster has lower carrying costs.
Another technology where creative alternatives can save money in lumber costs is engineered joists. For example, floor trusses can save money compared to traditional beams or tji joists. Less total lumber is used for a floor truss than traditional joists.
More Efficient Floorplans
Optimizing floorplans can also minimize lumber costs. Less circulation space is more efficient overall.
Homes with 20% less square footage can have similar amenities, while saving on the lumber package.
Another option for savings is to do slab-on-grade instead of a full basement. Utilizing a townhome-style build can save money on joists and sheet materials for the subfloor on the first floor. This is much more affordable, compared to a traditional two-story home with a full basement.
Efficient shapes will save money on lumber. By building dimensions that the lumberyard already stocks floor trusses for, minimizing protrusions or other features, you can reduce the total lumber costs on the house.
Focus on Renovations
Renovations are comparatively more affordable than new construction by utilizing existing framing and mostly focusing on remodeling interior framing.
Pivoting into the mindset of renovating instead of development applies to rental properties just as it does for detached single-family homes. During the 2021 spike in lumber prices, buying units to renovate and rent out became more attractive than the build-to-rent model.
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