How will the rising costs of fuel affect lumber market prices?
The United States has seen a lot of changes in lumber market prices over the past few years. These changes have surprised not just custom home builders, but those in the lumber industry as well. Many people are now wondering if rising fuel prices affect the lumber market, so we thought it’d be a good idea to discuss this in a bit of detail.
The Ups and Downs of Lumber Market Prices
The truth is that lumber market prices are very often in flux because they can be affected by multiple factors due to the steps involved with processing the lumber and getting it to the lumber yard.
During the few years prior to the pandemic, the price per thousand board feet of lumber ranged from approximately $300 to $600. It hit a record high of just over $1,600 in May of 2021, in large part due to supply chain and production issues caused by the pandemic. Then, after prices severely dropped about four months later, the invasion of Ukraine caused it to jump up again.
How Fuel Prices Affect the Lumber Market
Gas prices can basically affect nearly everything we purchase because any company that’s tasked with moving goods will see an increase in their overall costs. Then, in turn, they will often increase costs to whomever they’re servicing. In the lumber market, higher fuel prices mean that the cost of delivering building materials goes up. It also can translate to an increase in labor costs because the company supplying labor incurs a higher travel cost and will try to make up for it by charging more.
Other Factors That Affect the Lumber Market
The huge increase in lumber market prices prior to the pandemic surprised a lot of people. Even experts assumed that real estate would go into a tailspin due to the high unemployment rate. But, this didn’t happen. Instead, there was a big uptick in demand, which also led to an all-time high of bidding wars.
Why this happened is still somewhat up in the air, but there’s a good chance that stimulus checks had a lot to do with it. In addition to this affecting lumber market prices, there was also an increase in home renovations that made demand even higher.
What We Can Except to Happen in the Future
Although fuel prices have begun to drop, they’re likely to stay pretty high into 2023 and maybe even beyond. Therefore, even if we do see a bit of a drop, the uncertainty may cause lumber prices to stay approximately where they are now.
We hate to say that it’s a guessing game, but with so many factors involved, it’s hard to make a solid prediction. Also, keep in mind that millennials born during the generation’s five biggest birth years (1989 to 1993) are now reaching the first-time home-purchasing age of 30. This is also likely to keep demand for lumber up, even though supply may be somewhat limited due to labor issues.
How Custom Home Builders Can Cope
Even though you always have the option of putting off your plans to build a custom home, the uncertainty of lumber market prices doesn’t really make that feasible because you might be delaying construction and not save any money. Instead, there are a few options that can help you deal with the ups and downs of lumber costs:
Increase Your Budget
If your financial situation warrants it, you may simply want to increase the budget of your custom home construction. Doing this isn’t feasible for everyone, but it’s the perfect way to solve the problem. Just keep in mind other building materials, such as steel, have also seen higher prices, so you’ll want to be meticulous about your budgeting.
Decrease Your Plans
The other route that you can take is to pull back a little bit on what you’re planning for your home. If you build a slightly smaller house, for instance, then you’ll use less lumber. Or perhaps you can leave out certain parts of your dream home such as landscape elements and then add them later once fuel prices and building material prices have gone down.
Ask the Contractor
The final solution is to go straight to an expert, whether that’s someone helping you with design or the contractor who will be constructing the home. These professionals have seen everything under the sun and gone through countless fluctuations in construction and labor costs. They’ll be able to sit down with you and devise an effective plan that fits the market and any financial limitations.
Contact Peninsular Lumber for Lumber Materials in Tampa Bay
Peninsular Lumber has been a trusted part of the community for more than 75 years! If you need building materials for your custom home or have more questions about lumber prices, reach out by calling (813) 875-8805 today and come visit our lumber company in Tampa Bay!