Low supply, high demand drive up lumber prices

Low supply and high demand for lumber have driven up building supply prices in the past year, but that’s not slowing the construction of new houses or putting the brakes on all do-it-yourself projects — or dampening optimism that prices could come back down as the U.S. economy returns to pre-pandemic form.

People still want to build houses and contractors are staying busy despite the increase in lumber prices, according to Holton contractor Mark Aeschliman, owner of Aeschliman Construction.

“I’m seeing very positive things coming our way as the economy comes back into full force,” Aeschliman said. “There’s a positive outlook from most of the people I’ve talked to. It’s just that the lumber price is certainly a topic for discussion.”

The price of lumber has tripled in the past year, as Ross Vogel of Kansas City-based Heartland Housing Partners — which is overseeing the development of the 10-lot Banner Oaks subdivision at Holton’s southern edge — told the Holton City Commission recently.

Wholesale lumber suppliers such as Holton’s American Wholesale Company, which sells lumber wholesale to contractors, are also feeling the squeeze, said Gary Heideman, general manager and co-owner of the company.

“The price of lumber has really stretched everybody’s inventory dollars,” Heideman said. “You don’t have near as much lumber, but you’ve got a lot more dollars worth sitting out there. A lot of my customers are trying to keep their inventory down. They’re ordering just what they need and not any extra, because they don’t want to get caught if the price goes back down.”

And while there are indicators that the price of lumber might go back down, with wood production hitting a 13-year high, demand also remains high, keeping the cost of lumber high as well — a supply and demand mismatch that’s largely attributed to the COVID-19 pandemic of the past year.

“What we’re dealing with is that during the heaviest part of the pandemic, if one person got COVID-19 at a lumber mill, they’d have to shut it down and they would get backlogged,” Aeschliman said. “That would create a shortage of material.”

Another factor aggravating that shortage, Aeschliman said, were historically low interest rates that enticed more and more potential homebuyers to consider loans for new construction. But, as he tells potential customers, the increase in lumber prices should be weighed alongside the low interest rates.

“Two or three percent for a 30-year mortgage is pretty much unheard of,” he said. “To not take advantage of that, looking long-term, would be something a person might regret.”

Heideman agreed that the low interest rates have propelled new construction to “a record high, or pretty close to it,” but there are other factors that are keeping contractors and do-it-yourselfers from getting the lumber they need at the prices they’d prefer.

“Some of the lumber mills are starting to produce more, but some of them are having a hard time getting logs in,” Heideman said. “Trucking has also become a pretty big issue, as far as getting loads on trucks.”

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