Rising lumber prices are impacting home construction costs

Stack of lumberWhen many people think home construction, they naturally think of wood. Apart from stone and clay, wood may be the oldest building material in existence. It’s associated with durability, class, and giving homes that traditional, European look. As a contractor, you likely work with large amounts of lumber every month.

One thing you may have noticed this year, however, is that the cost of some lumber has increased dramatically. From July of last year to June 2018, the average price of lumber has increased by roughly $150, according to the National Association of Home Builders. Part of the reason behind this is natural price inflation.

Another large factor, however, are the recent tariffs levied by the Trump Administration. As of March 14, 2018, the Trump Administration placed a 20.8 percent import tax on certain Canadian softwood construction materials.

John C. “Jack” Dawley told the NAHB: “For most people, including me, the topic of tariffs and their impact is abstract. It was instantly clarified with this message.”

The recent tariffs affect the already rising place of lumber, which saw increased demand following the 2017 hurricane season.

“The tariffs could result in the loss of 9,370 home construction jobs in 2018.”

How will the tariffs shake out?
A large portion of the lumber that is used in America comes from Canada, including 100 percent of red and white cedar shingles. As our nation has evolved, our economy has shifted. Much of the country is in a drought, requiring that wood be brought in from our border countries – primarily the “neighbor to the north.”

It is unknown how long the Trump Administration plans to keep the tariffs on Canada, but recent developments in the news hint that the relationship between Canadian Prime Minister Justin Trudeau and President Donald Trump is strained.

Without any dramatic change in relations between the two countries, you should not count on the prices of lumber falling in the near future. As wood was already a more expensive construction material, you should do your part to educate your clients in its rising costs, to avoid projects that break the bank.

According to data gathered by the NAHB, these tariffs could result in the loss of 9,370 home construction jobs in 2018.

“The simple fact is that [the] U.S. simply does not produce what it consumes, and its economy relies on the rational importation of certain goods,” Dawley stated. “In the case of home building, taxing such goods via a tariff simply drives up the cost of production.”

Looking to lumber alternatives
Until such a time as the tariff situation resolves itself, you can look for alternative materials to use in home construction. Steel is another common home framing component. However, despite the rise in wood cost, steel remains slightly more expensive. According to Kompareit, the average price of steel in 2018 is generally five to 15 percent higher than the cost of wood.

Steel is also not as flexible as wood, given that many of your clients may find its look cold or off-putting.

As a home builder, you’re bound to follow the ebbs and flow of the greater market, same as anyone operating in business. The current tariff situation has created a problem, which may develop into an opportunity for those looking to disrupt the market with new building materials. Time will tell how this situation plays out.