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What happened to America’s lumber industry

Published: May. 5, 2021 at 3:31 PM MDT
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RAPID CITY, S.D. (KEVN) - Why are lumber prices so high? There are a number of factors that have come together to create the perfect storm in this resource drought and much of it has to do with the pandemic.

During a year when the country found itself mystifyingly homebound, the rise in do-it-yourself projects, many of which required lumber, became the activity du jour.

Along with the shutdown also came the designation of big box retailers as “essential businesses.”

These mega-retailers, with their sheer volume and variety of products, saw a giant leap in business as they catered to the large-scale and varied needs of a market who’s basic way of shopping had become order-for-delivery. With the click of a mouse, Americans could shop and purchase with ease, and while stuck at home without much else to do, shop and purchase they did.

Make no mistake, DIY projects hit the lumber market hard and virtually decimated the available lumber inventory.

The Home Depot, for example, reported that its quarterly sales climbed by 23% as homebound Americans went about their socially isolated lives, building decks, painting rooms, handling long-overdue repairs and investing in DIY upgrades. During the height of the pandemic the demand for our nation’s lumber inventory became far more than what could be sustainably supplied. To add insult to injury, the early days of the pandemic saw the shuttering of lumber mills that were closed due to employee infection cases or the fear of spreading the virus.

In those early days of pandemic, no one expected the do-it-yourself surge. At the same time housing construction ground to a halt.

Early on, around March of 2020 it seemed logical that America’s demand for lumber would, in the foreseeable future, taper off. With the unprecedented lack of experience in global pandemics, no one had the foresight to imagine that the demand for lumber in the United States would skyrocket.

Those big-box mega-stores profited tremendously during the shutdown months. According to CNBC, Lowe’s second-quarter revenue surged by 30% and their profit jumped to an uncanny 68.7%. While so many businesses crumbled under the stress of the COVID-19 crisis and life-changing consumer behavior, big-box retailers made a windfall while simultaneously decimating the lumber industry and its product availability. Lumber, we must remember, comes from trees - a natural resource. Trees are a renewable resource to an extent, but caps on deforestation have to be implemented if we are to protect our invaluable environment.

The country began to slowly open back up. Out of their quarantined shells, Americans began to emerge. Working from home slowly began to transition back to regular in-office time, and the construction industry awoke from its masked and shuttered period of quiet to begin building again.

No one could have expected the housing surge that was to follow. During the height of the pandemic many urban-dwellers began to desire less densely-populated neighborhoods. The cities that had sparkled so brilliantly pre-pandemic had lost their luster. Huge urban spaces like Manhattan seemed less idealistic when compared to the calm, clean, less-populated nearby suburbs. People wanted out - of their quarantines and the cities in which they had been held captive.

The construction of new homes in suburban enclaves surged by 17% in June 2020. In July of 2020, new construction broke barriers again - this time by 22.6% over June. In uncountable ways, no one envisioned the repercussions of the pandemic. With the cost of homes and the materials needed to build the homes that had become so desirable by so many, the housing industry hit well above market forecasts.

And now we’re all paying the price.

A huge error in judgement was made by many very savvy individuals who spend their lives predicting the markets.

The housing market had been expected to absolutely crash and instead what happened was the opposite. The current real estate market for single family homes in America is shaping up to be one of the busiest construction seasons in years. This leaves lumber and the lumber industry in serious peril.

Builders currently have to search harder and pay much more for the materials they need. In many cases, orders for lumber are weeks and even months out. The demand for wood and the sawmills that process the product are in a supply chain nightmare of sorts.

There is unprecedented pressure to keep up with demand, there are limited resources available if we are to remain environmentally cognizant, and so the price of lumber has been pushed to shockingly record levels. The normally well-equipped lumber supply chain has not been able to keep up with demand and everyone is paying the price - in particular the home buyers, upon whose shoulders the final price of materials fall - if they want the house, that is.

No one really expected lumber prices to climb as high as they already have, and the truth is that no one really knows how high lumber prices will get or when these incredibly high costs with end.

One thing is for sure, though – what goes up must come down. The high lumber prices will eventually come to an end. Once supply and demand equalize, building slows, and the lumber supply chain catches up, we should see prices come back down to normal levels.

Life as we knew it before the pandemic remains less likely to return to its previous innocence.

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