Home builders

Lumber prices plummet, but supply and labor ‘chaos’ hit state homebuilders

By Thomas Clouse/The Spokesman-Review

Lumber prices have finally fallen to record lows, but other supply issues will keep homebuyers from reaping the benefits of lower costs for some time, industry officials say.

According to the National Association of Home Builders, the cost of lumber per 1,000 board feet had fallen to around $400 by September 3. The price was just under $600 per 1,000 board feet in November 2020 during the coronavirus pandemic before skyrocketing to $1,500 in May.

While cheaper lumber has been welcomed, local builders face other challenges with higher prices for virtually everything that goes into a home, including higher labor costs due to a shortage of workers, said Ben McGerty, regional manager of Hayden Homes.

“As the world moves back into the delta variant, we are dealing with (disruptions) on a daily basis,” McGerty said. “You have to laugh about it. ‘What is it today?’

“The last call I got was, ‘We can’t have a toilet,'” he said. “It makes it a bit difficult to close houses without toilets. You can get the bowls but not the tanks for the toilets. It’s difficult.”

Joel White, chief executive of the Spokane Home Builders Association, said the disruption will prevent cheaper lumber prices from having a immediate downward effect on house prices.

“Builders will start pricing (lower lumber prices). They want to be competitive,” White said. “But it takes time for the market to adapt.”

During the rise in timber prices, contractors had to use escalation clauses in contracts with buyers to cover higher costs. Lumberyards also set deadlines for how long their quotes would be honored.

“When the price of materials goes up, you see increases almost immediately in the market,” White said. “But, you don’t see the drop for a while because … the builder or the lumber yard will hold their prices as long as they can, until people stop paying them.”

James Morgan, purchasing director of Greenstone Homes, said the drop in timber prices “has been a relief, absolutely”.

“While lumber has been down, there are other aspects that are keeping (prices) up,” he said. “If you look at what the consumer is paying, there have been so many other increases.”

Owners of new homes may see a break if they build the house themselves, but contractors are facing shortages or higher prices for everything from screws to metal roofing to shortages of resins used in the manufacture of PVC and PEX pipes.

“You name a product, we probably need to find substitutes,” Morgan said. “It’s pretty much anything in the industry. It’s very high demand and limited supply.”

The higher cost of building new homes has coincided with a booming housing market spurred by a limited supply of homes combined with a steady influx of people moving through the area.

However, Spokane County’s median home price for August fell to $389,728 after peaking at $395,000 in July.

White said the local market needed to cool, which could provide an opening for homebuyers who have decided or have been forced to wait due to rising house prices.

“We’re seeing an easing of the market,” White said. “It’s not like seeing a crash, it’s more like a stabilization. The bidding wars aren’t as strong as they used to be.

“We will see some price relief going forward. I just don’t know when.”

White’s organization uses the metric that estimates that about 200 families are out of price for buying a home for every $1,000 increase in the price of a home.

“It’s good to see (timber) prices come down,” he said. “We want homes to be affordable and accessible at all price points.”

Rising costs and the hassle of paying $30,000 to $50,000 above asking price have convinced many buyers to wait, White said.

“The bidding wars aren’t as strong as they used to be. There’s still a lot of pent-up demand in the market,” he said. Many buyers “are tired of bidding and losing on homes. I think there’s an opportunity.”

McGerty of Hayden Homes believes the market influences that have driven home prices higher will continue, due to supply issues and labor shortages in the area.

“This market has exceeded the capacity of our trade,” he said. “Builders’ labor pool does not match demand.”

The stress of promised deliveries not showing up and managing teams every day when you don’t know what they will be able to work on has caused some small contractors to give in because they couldn’t pay the bills while waiting for the arrival of the materials, he mentioned.

“Work has never been harder than it is now, with the pandemic, labor and material shortages,” McGerty said. “Some businesses have collapsed. There’s an exhausting amount of moving parts that we try to keep up with and it’s very stressful.

Falling timber prices are good news, he said, “but it’s still chaos.”