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equipment shortages: (Exhibit 2)
has staged a staggering increase in recent months, rising roughly 80% since mid-April to an average price above $600 per thousand board feet. The prices listed below provide an overview of the behaviors within the U.S. framing lumber pricing market: (Exhibit 3) It is difficult to dispute that COVID-19 has impacted lumber pricing throughout our industry. Key contributors to this recent price surge stems from both unexpected factors on the demand side and miscalculations on the supply side. As reported throughout various publications, many lumber mills ceased production entirely due to stay-at-home orders and plummeting demand at the beginning of the pandemic. Thiswas right at the start of the typical building season for much of the U.S. (i.e. when contractors tend to begin new construction projects due to favorable weather conditions). Once stay-at-home orders started to be lifted and the economy began to bounce back, mills resumed but
at much lower rate of production. Industry reports suggest many anticipated / forecasted a sharp decline in demand of lumber, but as it turns out that was not the case, thus a huge surge in unexpected demand. Lastly, let’s not forget about the impact DIY projects for consumers are having on today’s market. During the pandemic, DIY projects became a higher priority as many homeowners started to tackle home improvements during quarantine periods (weekly consumer spending in the home supply category jumped more than 80% year-over-year. While a virus-driven downturn presents owners and general contractors with some unique challenges through nationwide shutdowns, material and equipment scarcities, shortages of skilled labor, and escalating building material costs, the affordable housing construction industry can prevail through collaborative efforts of both parties and implementation of appropriate strategic planning.
As a result of these recent trends, CREA has developed a COVID-19 Questionnaire that is sent to each developer during our pre-closing underwriting process to aid with identifying the status of subcontractor buyouts and material orders. We recently started receiving reports that general contractors are planning to consider “closing draws,” which will help with securing select building materials and equipment earlier than normal in the construction process (i.e. through deposits and/or securing off-site stored materials). This will help offset any potential delays or significant material price escalations during the procurement process. Sourcing materials sooner rather than later will help ensure the closing development budgets remain intact. The scarcity of these materials has caused rising costs at a record pace. Most notably and as reported by The National Association of Homebuilders, the price of lumber
Exhibit 3
Exhibit 1
Exhibit 2
The information is sourced each week using the Random Lengths Framing Lumber Composite, which is comprised using prices from the highest volume-producing regions of the U.S. and Canada.
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