Lumber shortage due to COVID causes price spike

Richard Reeve
Updated: September 22, 2020 10:15 PM
Created: September 22, 2020 10:08 PM

Patrick Murphy is one busy homebuilder. 

"This is the busiest year since I've started with the company," Murphy said. "I think people are spending a lot more time at home due to COVID. They want to expand and get more space and do some remodeling, since they're spending so much time there." 

Murphy is an assistant project manager with Anchor Builders of Minneapolis. The company normally constructs twenty projects a year, but not in 2020. 

"My twenty years in the industry, I've never seen anything close to this," declares co-owner Barak Steenlage. 

This fall, Anchor has twice as many projects in the design phase. But there's a big problem. A huge lumber shortage. 

"Mills are all shut down, they're not running product right now," Murphy explains. "They took a break for a while, started to fall behind on the demand."

Call it the COVID construction conundrum. 

Minnesota's $7 billion forests and timber industry along with 27,000 employees statewide are getting hit hard by the pandemic. 

"A lot of mills across the US and Canada shut down," says Mike Birkeland, the Executive Vice-President of the Minnesota Forest Industries and Timber Producers Association. "Some, voluntarily, because they were worried about health and welfare of employees, but also, as a result of shelter in place orders."

The shortage of supply has triggered a spike in lumber prices up to $834 per thousand board feet. That's triple the price of lumber back in April. 

 "Everything slowed to a halt, real quickly," Birkeland says. "That affected the supply chain, and the mills have just never caught up once people were at home."

The National Association of Home Builders says with supplies low, the average price of a single-family home has jumped $16,000 since mid-April. 

"We never would have anticipated something like this, having such a big impact on the market, both from a supply side, but also again, on the demand side. A similar effect," Steenlage says. 

This perfect storm in the construction industry is hitting as housing starts in the metro area are surging. 

Home prices are now up 17%, according to a new report from the Minneapolis Area Realtors. 

Homeowners are doing more with less, at a time of safe-distancing, and self-isolation. 

"It's their office, it's their gym, it's their play area," Steenlage notes. "I think people, as they adapt to this new situation, and try a new work-life balance, 'maybe we should be home more, and I want more out of my home.'"

Meantime, builders like Murphy are having to wait, hoping the lumber supply chain will catch up. 

"It slows everything down, so we're trying to keep building here, keep moving along," he says quietly. "Like, I've had a three-week delay on my project here now, waiting on tiling and roofing material for the ceiling."

Steenlage says right now, there's a shortage of homes on the market that are ready for sale. 

He warns prospective homeowners should be prepared to pay more, and that there are bidding wars out there. 

He advises doing design work first. That, he says could take the volatility out of buying. Birkeland, meantime, says he's confident the shortage will correct itself. His advice? If you're able to delay a project, you could have money in the long run. 

Steenlage hopes the slower construction season during the winter will allow mills to catch up.

But with the pandemic, he says, the future remains uncertain. 

"I think one of the hopes is that since it's largely a supply issue, versus a demand... that they would have the ability to catch up," Steenlage says. "Whether it's adapting to the current climate, or reopening the mills that were shut down."


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