Housing costs have increased by as much as $100,000 in the last year due to ever-increasing lumber prices (Image Credit: CFJC Today)

By Chad Klassen

LUMBER PRICES

Lumber prices keep rising, adding costs, stresses to Kamloops home builders

May 19, 2021 | 5:05 PM

KAMLOOPS — The production line at lumber mills across North America are running again closer to full capacity, simply trying to keep up with consumer demand.

Despite predictions of an economic recession at the start of COVID, nothing has changed, and in fact demand is significantly up.

“Dealers and producers were looking at what they thought was going to be a very steep decline in economic activity, industrial production, housing starts,” said lumber analyst Paul Jannke. “They thought we were going to have a severe recession, so dealers cut back on inventory, producers cut back on production.”

Jannke says the lowest price of lumber per thousand board feet during the pandemic was $300. It’s now past $1,300 — four times the price — which has even increased by 25 per cent in just the last month.

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TRU Dean of Economics Mike Henry says the combination of high demand, encouraged by low interest rates, and low supply with mill shutdowns, reducing production significantly, has led to the spike in lumber prices.

“Interest rates look like they might be going up, so people are getting into the housing market now,” he said. “Put that on top of COVID shutting down a whole bunch of mills that were already struggling because of the pine beetle infestation, and then you’re coming out with this boom and all of a sudden we capacity that’s been down.”

The staggering price of lumber is being passed onto builders, and ultimately consumers. As an example, a show home built at Orchards Walk was finished last year, at the beginning of 2020. It sold for $765,000. At this empty lot a couple doors down, it’s a different story. It’ll be the exact same floor plan — same amount of bedrooms, bathrooms, and square feet. The estimated cost? $859,000.

The nearly $100,000 difference is due to the increase lumber prices and other materials. It’s making home construction more challenging for builders.

“April of last year, we were paying $19,000 for the trusses and joists, and this year we’re paying $37,500 for the same truss package and joist package,” said President of the Canadian Homebuilders’ Association Central Interior Jere Lorenz. “We’re talking 790 sq. ft. duplex, times two on the upper floor. That’s 1,580 square feet. That’s the kinds of increases we’re having challenges with to keep our budgets in line.”

Lorenz says with prices changing by the day, the cost of the homes at Orchards Walk are jumping as the building process moves along. As a result, there are no longer pre-sales, as Lorenz, the developer, protects his assets.

“In the beginning, we started to pre-sell the units. We had locked-in contracts. Our prices were confirmed. But then, prices became too volatile where they’re only holding the prices for days, not even weeks or months,” noted Lorenz. “Then we just stopped selling and now we take a building to a certain point. Once we have all our prices locked in and are confirmed, signed contracts, then we list the price.”

It’s a sign of changing times in construction, as builders try to keep up with demand, while also ensuring they can make money amidst rising lumber prices.