Does Money Grow on Trees: Why Is Lumber So Expensive?

Lumber has increased in price like it has never before. For the same date last year, wood is up by more than 80% and it has caused a lot of speculation, ranging from manufactured scarcity to conspiracy theories.

But what are the facts behind this dramatic shift? What are its consequences? And what can we expect next? This article seeks to shed some light on this subject and explain that which has dominated speculations on the job site.

 

Why Is It So?

There is not one absolute factor that caused this spike in demand, but if one had to target a meta-factor (and I doubt that it will surprise you), it would have to be Covid, yes, Covid again. But this isn’t as bad as one would think. First, this rise is caused in great part by the increasing demand of the construction industry; by which I mean that due to the pandemic, people expected the housing and commercial market to go down tremendously, but the opposite has in fact happened. Add to that factor the governmental programs to restart the economy making the construction industry one of its main beneficiaries.

Then, there are the DIY projects which have also seen a tremendous upsurge in popularity. Since people refrained from going on vacation and had a few more days to spend in the comfort of their own backyard, it’s no wonder that these renovations have been on the rise. Finally, there are the supply chain issues. Due to Covid, a lot of companies, manufacturers, and, more importantly for this article, lumber yards, have been forced to shut their doors for some time. The borders then got more difficult which basically caused an overall slowdown of the supply routes. Basically, the scarcity is not artificial, there are plenty of reasonable causes for the increase in demand and the decrease in supply, which as you might remember from your economics classes, causes a rise in price. This is just how the market works.

Consequences

As it is with most markets, this price change is bound to readjust itself organically. People or companies will find a way to go around using lumber for their construction projects. A few companies have already started developing new products. As soon as these hit the market, and we give time to the supply chain to catch up, there will be a decrease in demand, thus in price as well.

For example, products such as Insular Concrete Forms (or ICFs) which also has insular properties. It essentially consists of a concrete foam that is placed between two panels or molds that shape the exterior wall. Once the ICF hardens, the panels are taken down and what is left is a by-product of concrete with good insular properties.

Another alternative to wood is Lightweight Steel Framing. This consists of replacing the traditional wooden framing of the house with lightweight steel. It offers a much more resilient type of construction and is a material quite easy to work with.

What Will Be Next?

I believe that it is fair to say that things will eventually be back to normal. This is, by all indications, just a bubble, one which is not obscure to the market of essential goods. Take oil for example, which has seen a great many changes in price in the last decade. Of course, lumber is far less volatile than oil, which it is why it is less worrisome. There might also be a more permanent consequence to this, which is the exploration and adoption of new trends and alternatives in the construction sector.

This unexpected event is by no means permanent, but it might force us to re-evaluate our dependency on lumber. In these strange times, the market is bound to act in strange ways. But we have gone through a lot in the past year and all the factors indicate that we are at the end of the struggle. So, if you wanted to build your house or redo your patio, it might be better to wait until next year, or just find an alternative to wood.