Lumber boom pushing construction prices higher in 2021

lumber stock image

Ontario Construction News staff writer

Higher prices for lumber this year have added about $30,000 on to the cost of the typical new home, RBC analyst Paul Quinn said in report.

An unexpected rebound in wood product prices is boosting profits for Canadian forestry companies but leaving homeowners and buyers with the prospect of higher home and renovation costs in 2021.

Prices for lumber and wood panels are up in December due to strong housing markets and limited capacity to increase North American production following a seasonal softening of prices in October and November, said Quinn.

“As we head into 2021, we have seen unprecedented pricing levels to close out 2020 with (lumber) prices moving higher following a pullback in October/November.”

“With demand likely to get stronger as dealers get ready for what should be a very strong spring building season, we expect that prices will remain at a high level during the first half of the year.”

Next year could be even brighter for producers than 2020, he said, adding that record high prices set last summer as COVID-19 forced people to work from home — thus sparking interest in renovations or buying a bigger house — will likely continue or be eclipsed in 2021.

The price volatility and shortage of supply of some wood products means headaches for homebuilders trying to take advantage of the current strong market for new houses that is expected to continue in 2021, said Kevin Lee, CEO of the Canadian Home Builders’ Association.

“Our members price houses based on expected near-term prices for lumber and then, when they go up, it becomes very hard to operate,” he said. “They went down a little bit through October but you’re still talking about lumber prices three or four times the prices from a year ago. And now they’ve escalated right back up again.”

He says higher lumber prices this year have added as much as $30,000 to the construction cost of a typical 2,500-sq. ft. (232-sq. m.) house in Canada.

In a report, RBC cited strong wood product demand and the lower U.S. lumber import duties for its bullish rating.

In a new forecast, RBC raised its composite price estimate for lumber in 2021 to an average of US$575.


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