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ADDING UP: Branco Enterprises' Sean Thouvenot says the lumber budget has increased by nearly $9,000 for an eye clinic job in Republic.
SBJ photo by Jessica Rosa
ADDING UP: Branco Enterprises' Sean Thouvenot says the lumber budget has increased by nearly $9,000 for an eye clinic job in Republic.

High lumber prices drag on contractors

Builders predict costs will remain elevated well into 2021

Posted online

A steep rise in lumber prices amid the coronavirus pandemic has dealt some unexpected financial challenges for the construction industry, local representatives say.

Framing lumber prices peaked in September to an all-time high above $950 per thousand board feet, according to data from pricing service Random Lengths. While the price has since lowered to around $620, as of Nov. 23, it’s still nearly double year-over-year costs, which were near $337 by late November 2019.

The pandemic is largely responsible for the lumber price hike, as producers shut down in March and April and supply dropped swiftly, said Sean Thouvenot, vice president at Branco Enterprises Inc. However, Western wildfires in September that impacted Oregon and Washington, where several mills operate, also contributed.

“August is when it really hit us hard on some jobs as far as price increases,” Thouvenot said, noting around 20% of the company’s projects have wood frames. “But I would say it impacted all of our projects in some form or fashion.”

He declined to estimate the companywide financial impact of the price increase, but said its ongoing construction of Hart Eye Clinic in Republic cost roughly $8,600 more for lumber than originally budgeted.

“It hit us pretty hard on that one,” he said.

Thouvenot said projects Branco is now bidding account for the lumber cost increase.

“But projects that were bid before May are the ones where we’re taking the hits,” he said, adding that included the $6.25 million McQueary Family Health Sciences Hall addition at Missouri State University. “Those ones come out of our bottom line. You can’t very well pass it on to the owner.”

Take the hit
Construction input prices increased 1.1% year over year in October, largely attributable to softwood lumber prices, up nearly 69% over that same 12-month period, according to trade association Associated Builders and Contractors. Leveling out the pricing input are natural gas, unprocessed energy materials and crude petroleum that are down substantially since 2019.

“It kind of caught us off guard,” said Bussell Building Inc. co-owner Tyler Bussell of the higher lumber prices. “Initially, when the pandemic hit, we weren’t quite sure how the building industry would be impacted.”

The homebuilder said his prices are locked in as soon as a construction contract is signed with the buyer.

“If lumber goes up, I just take that hit,” Bussell said. “I don’t go back to the buyer and ask for more money. We don’t put any kind of verbiage in there. That’s not a contingency in our builds.”

Lumber’s an essential part to every home built. Bussell estimated his company has spent $100,000-$150,000 in additional lumber expenses than anticipated this year.

The lumber price spikes nationwide have added more than $16,000 to the typical cost of a new single-family home, according to the National Association of Home Builders.

Differing expectations
While Bussell and Thouvenot weren’t expecting a rise in lumber prices, Springfield Contractors Association Executive Director Megan Short said nothing feels surprising to her this year.

“This is such a weird year and there’s nothing to compare it to,” she said of the record lumber prices. “Sure, we’ve had shortages in other years, but normally there’s workarounds and things like that. There’s no precedent for this year, as far as the supply chains went. Treated lumber was one of the first things we started to really hear shortages on.”

Short said the topic has been discussed with SCA members since at least June, when the shortages started.

“We knew there would be some shortages just with manufacturing facilities getting shut down,” she said.

Jason Bekebrede, owner of Monticello Custom Homes & Remodeling, said he’s been watching the lumber prices continue to fluctuate. He considers himself fortunate that his business wasn’t impacted as much by the increase during the summer.

“We’ve been actually pretty lucky that most of our projects were remodels rather than new construction,” he said, noting he’s had local lumberyards price product numerous times as he gets closer to locking in a contract with a buyer.

Construction industry officials expect lumber prices to drop lower than the current mark, but it could still be many months before they get close to last year’s levels, which generally ranged $300-$400 per thousand board feet, according to Random Lengths data.

Bussell is taking an optimistic outlook that prices will be back in the range of 2019 levels in the next 6-8 months.

“We’re trying to weather the storm the best we can and just try to hold our price as much as we can so that when they do come back down, we’re able to adjust our price accordingly,” he said.

Thouvenot said the pandemic and its long-term economic impact factor into the equation as to when and if lumber prices drop significantly.

“It’s going to be a long time before it ever goes back to where it was this time last year,” he said. “That would be late next year sometime.”

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