You have probably heard one horror story or another about commodity pricing and the impact on the economy. Whether computer chips, plastics, or lumber – supply disruption has had huge impacts. The pandemic driven trade barriers, border shutdowns, and business interruptions have caused massive price fluctuations. We at Ausland have seen massive price moves in wholesale numbers, similar to what the average home owner shopping at Home Depot has seen.
As of August 16, 2021, the lumber cash price (wholesale number) had dropped to $432 per thousand board feet, from the peak on May 28, 2021, when the same lumber cost $1,515. The average weekly price number for wholesale lumber was $372. The Covid-19 pandemic generally, and now the exploding Delta Variant, has cast a spotlight on the structural vulnerability of domestic and international supply chains, and has been the catalyst for lumber shortages and prices fluctuations. It is no surprise that the cost of construction has rapidly increased, and builders are having to build in larger contingency fees on bids in order to guarantee prices for months, in the face of commodity prices wildly fluctuating.
On top of these supply impacts, no one predicted there would be a large home project and remodeling boom. Many people, buoyed by government cash payments, choose to spend their lockdown time and money on home improvements. The already constrained supply ran headlong into bursting demand. It does not take an MBA to see the economic impact and price inflation that would come. We are seeing some cooling of the housing market new starts and leveling off commodity pricing, which is good news.
Maintaining steady communication with suppliers, clients, and subcontractors helps to combat these unique supply and demand cycles. As of August 2021, there is no telling when “normal” will be returning. We expect to see pricing continue to fluctuate through this year, but the bottom line for anyone looking to do a construction project, is that pricing is up substantially from a year ago – materials and labor – and we do not expect those cost to be returning to 2019 levels. While the price fluctuations are leveling off, we do not expect to see much more commodity price reduction, but we do anticipate continued pressure on wage inflation. Ausland has the relationships to help our clients navigate the pricing challenges in the market right now. Let us know how we can help you build your future.
Chris Morsa | September 3, 2021