Updated: May 7, 2021
The cost trends and analysis of material pricing seem to constantly be a hot topic of discussion in the construction industry and beyond – whether in response to public policy, concerns about infrastructure or the effects of the pandemic and natural disasters. Lumber costs have been front and center recently, as prices have sky-rocketed. Being a company with a keen eye on the construction industry and the materials used in our projects, we welcome the conversation, and we would like to add our expertise. Through this blog, we’ll examine the long-term cost trends of the industry’s most vital materials.
Tracking Wood Costs
Wood is overwhelmingly the material of choice in residential construction framing and the popularity of wood framing is on the rise in the commercial space. Framing aside, wood is commonly used for flooring, door and window trim, molding and trusses. It’s easy to understand wood’s popularity: The material is plentiful, durable, strong and, depending on how it’s sourced, renewable.
When we previously looked at the cost of wood in 2018, our analysis showed the cost of wood is as steady and reliable as wood itself. From 2014 through 2018, design professionals and we contractors enjoyed relative price stability for one of construction’s most popular materials.
Several varieties of wood are used in construction, so in our previous analysis of costs we developed an index of wood materials consisting of:
3/4 inch BB ply-form
1 x 6 #2 pine boards, S4S
2 x 4 kiln-dried framing lumber
1/2 inch plywood, 4 feet by 8 feet sheets
The baseline for this wood index is 100 — that’s our starting point. The graph above looks at cost fluctuations in relation to that point and stayed fairly steady. But the data now shows this cost trend is rising at a volatile rate. This time we’re going to look at some of these material cost trends separately to better showcase these changes.
Our Construction Cost Database
Skyline Consulting Group, LLC regularly collects, validates and analyzes local and national construction material costs and trends to maintain our construction costs database.
The Dramatic Rise in Lumber Costs
We have been tracking and monitoring lumber costs even more diligently since last summer when suppliers found themselves impacted by COVID-19 restrictions and also unprepared to meet the demand, as Americans quarantining at home pursued renovations projects and do-it-yourself projects. To further increase the demand, low interest rates elevated the market for new homes causing home builders to boost production. This cost surge is a classic example of supply and demand.
According to our analysis, the average price of framing lumber is at an all-time high — up 162% since the fourth quarter of 2019, the onset of the pandemic contributing greatly to that climb. The National Association of Home Builders calculates that current lumber prices are adding at least $24,000 to the price tag of a typical new single-family home. And while lumber cost is not a major driver of commercial construction costs, engineers are seeing widespread, unprecedented material price fluctuations in recent quarters.
We’re closely tracking how retail pricing compares to future forecasts and where lumber costs will go. Unfortunately, we fully expect more price increases as this material trend continues to rise.
Increases Across the Board: Other Wood Material Costs
Framing lumber is not the only wood cost on the rise. Plywood costs are also climbing, in particular the raw average cost of ½ inch plywood sheets have increased 137% since this time last year.
The raw average material cost of pine boards is also on the rise — up 65% over the past two years and on a rising trend.
These rising price trends we have seen in recent quarters will have an impact on the cost of construction for the foreseeable future. This volatility in lumber cost hikes has stunned the market. We’ll continue to track these changes and work to purchase all materials with a close watch on competitive pricing. Where possible, we are striving to come up with alternative materials of equal performance in an attempt at keeping budgets within reason.