Since the onset of COVID-19 in mid-April 2020, the composite price of lumber has risen more than 160%. This sudden surge has added approximately $16,000 to the average price of constructing new single-family homes and an excess of $6,000 to the average new apartment, according to a recent economic analysis performed by The National Association of Home Builders (NAHB).
The steep rise in lumber costs have threatened the affordability of constructing new homes and the housing industry as a whole, which has been the leading sector in our nation's economic recovery efforts.
The rising costs of lumber that we've seen in recent months are a result of a shortage in domestic production. Many mills curtailed production with the onset of this COVID-19 due to the stay-at-home orders enacted by state and local governments with a general consensus that the housing sector would slow down. Mill operators projected that the housing industry would be adversely affected by the pandemic and anticipated a large drop in demand. The housing sector pushed forward showing little change. As a result, demand has accelerated rising the cost of lumber.
Alongside The National Association of Home Builders (NAHB), BRAGB continues to seek efforts that will prompt action from the State and National Administration by calling on domestic lumber producers to increase their production in order for supply to meet demand and ease the growing shortages that we've recently seen. NAHB has made it a priority to work with Canada on a new softwood lumber agreement that would result in an end to tariffs averaging more than 20% on Canadian lumber shipments into the U.S. market.
It's recommended that you use an escalation clause in contracts to protect against the rise in lumber costs that may affect your project's overall success. The clause indicates if lumber prices increase by a certain percentage after the start of a project, the client is responsible and required to pay the extra costs associated with demand-pull inflation.