Homeowners who resisted the urge to renovate during the first 18 months of the pandemic may find now is their chance, as lumber prices that soared to dizzying heights in the spring have crashed back down to earth.
At family-run Peacock Lumber in Oshawa, Ont., owner Glen Peacock said retail prices have “collapsed” in recent weeks. An eight-foot-long, two-by-four inch piece of framing lumber that cost $12.65 on June 1 is now selling for $3.95, Peacock said — basically what it would have sold for before the boom.
“It was amazing it went as long as it did before people said ‘this is too much money,’ ” Peacock said. “People who waited, if they could, to do their projects are going to be in a much better position.”
A pandemic-driven surge in home renovations and do-it-yourself projects sent shock waves through the home improvement and construction industries earlier this year. North American lumber prices hit record highs of more than US$1,600 per thousand board feet in May — three times higher than pre-pandemic levels.
The price roller-coaster had customers pre-ordering lumber months in advance to ensure supply and even resulted in a spate of opportunistic thefts from construction sites across North America.
But the ride has come back down even faster than it went up and that means many retailers have been stuck trying to get rid of product they purchased at higher prices.
“With lumber prices falling as fast as they did, it forced everybody to sell their overpriced inventory at a loss,” said Joel Seibert, owner of Mountain View Building Materials just outside of Calgary. “What would have been the ideal situation would be for the price to take twice as long to come back down as it did to go up.”
Liz Kovach — president of the Western Retail Lumber Association, which represents retail lumber, building supply and hardware stores in Western Canada — said the pandemic price bubble burst with the arrival of summer. Warmer weather and the easing of COVID-19 restrictions across the country resulted in Canadians travelling more and spending less time on projects around the house, she said.
“It’s been a challenge on the retail side,” Kovach said. “We’ve seen a lot of blowout price sales, just so that they can move the materials.”
The plunging prices have already led to curtailments and reduced operations at sawmills. Vancouver-based Canfor Corp. said at the end of August that it will run all of its B.C. sawmills at 80 per cent capacity until market conditions improve. Conifex Timber Inc., also based in Vancouver, announced Aug. 20 that it would curtail lumber production at its Mackenzie, B.C., sawmill for a two-week period.
The rapid rise in lumber costs earlier this year added “tens of thousands of dollars per home” to new home construction costs, said Kevin Lee, chief executive of the Canadian Home Builders’ Association. And while consumers may already be benefiting from lower prices at home improvement stores, homebuyers signing new construction purchase contracts are still seeing elevated prices.
“Builders still have to clear their inventories of having purchased higher-priced lumber. It takes a while to clear the system,” Lee said. “Yes, lumber prices from the mills came down dramatically over the summer, but that’s unfortunately taken a while to reach the rest of the industry and consumers.”
Lee said when it comes to new home construction, pricing is being complicated by ongoing pandemic-related supply chain challenges. While difficulties related to lumber have eased, homebuilders are still dealing with delivery delays and price inflation on everything from plumbing and electrical products to kitchen cabinetry.
“It doesn’t compare to the three to five times price increases we saw with lumber, but I’d say on average we’re seeing 10 per cent increases on everything including the kitchen sink,” Lee said. “And we are still seeing delays on closings, just because of an inability to get products and materials.”
In a note to clients earlier this week, RBC Dominion Securities analyst Paul Quinn said with the arrival of fall, lumber markets are already beginning to tick slightly higher. Home centres are noticing increased traffic as customers try to finish projects before winter, Quinn said, and retail demand tends to be a leading indicator for lumber pricing.
—Amanda Stephenson, The Canadian Press