Sorting lumber

Korey Rheaume sorts out reclaimed floor boards on the stage at the future space of Jimmy’s on Congress, a new music venue on Congress Street in Portsmouth on May 6. The owners of the club have been repurposing the building’s original materials during construction.

WITH MANY PEOPLE itching to take on home renovation projects during the COVID-19 pandemic, Concord general contractor Greg Baier offers advice his customers might not expect.

Wait.

“Do you need this addition now, or can you get away with it in like two years from now?,” the owner of Knollstone Contracting has told clients in recent weeks.

The cost of lumber and other building materials continues to increase because of a lack of supply. Most reaching out to Baier want to finish their basement, redo bathrooms or build a new deck as they spend more time working from home.

Not only are the costs high, Baier simply can’t keep up with the demand.

The average wait time right now: 14 months.

Other contractors have reported waits between six and 18 months, according to Joe Harnois, interim president of the New Hampshire Home Builders Association.

Lumber prices are up 300% over the past year, which has caused the cost of an average new single-family home to increase by nearly $36,000, according to the National Association of Home Builders.

“For first-time homebuyers, that pushes them out of the market,” Harnois said.

The cost of lumber has also increased the market value of an average multifamily home by nearly $13,000, which has bumped up the cost of rents by about $119 a month, according to the association.

For the past year, East Coast Lumber & Building Supply Co. has been busy trying to fill lumber orders for contractors and customers who come in to get supplies to take on home improvement projects.

Shipments have taken four to eight weeks longer to come, said Eric Murphy, purchasing manager. As a commodity, lumber prices vary.

“We call them looking for it, and they give us a price,” Murphy said. “We either buy it or we don’t buy it based on the price they are willing to give us … It’s a choice between paying too much for it or not having material for your customers.”

Some contractors and home builders are now putting escalation clauses into contracts to cover increased costs of material, Harnois said.

The cost of lumber changes every day.

“If you want it, you need to buy it,” he said.

John Harding, owner of Image Contracting in Bedford, said the volatility makes pricing a project difficult and impacts new construction more than remodeling because of the amount of lumber needed. A two-by-four now runs for about $9 or $10 compared with $3, he said.

“We’ve seen prices jump 10% over the period of a week or they’ve gone up 30% over three or four weeks,” he said. “It is just so unpredictable.”

Contracts are subject to change based on materials. Most customers aren’t deterred and just want the work done, he said.

“Honestly, for me it is more of the availability of the product that is more of a problem than the cost of it,” he said.

Unlike Baier, he doesn’t recommend waiting because the cost of construction will likely continue to rise because of a lack of workers. He is booked solid pretty much until the end of the year.

Supply and demand

Earlier in the pandemic, sawmills shut down or slowed their production to prevent a glut of product.

The industry saw this during a housing boom in 2006 when sawmills ramped up supply and were left with overcapacity heading into the Great Recession, said Chris Wilde, chief operating officer for New England Investment and Retirement Group. The group works with a number of contractors and those looking to make personal investments into their homes.

“I think there was a fear that this was going to happen again,” he said.

Unlike previous recessions, the COVID-19 pandemic brought on a different phenomenon with many people wanting to take on home renovation projects or move into more spacious homes outside of urban areas. The housing market is hot right now in New Hampshire with rising prices and low inventory.

Low interest rates have also boosted the number of people searching for their dream home, Wilde said.

Murphy said sawmills worried about having too much product but not enough demand as the economy shut down to stop the spread of the coronavirus.

“They’ve never caught up,” he said.

The increased costs are being passed along to the homebuyer, Wilde said.

“So far, the homeowners have been willing to bear the cost,” he said. “Part of the surprise in all this is that it has not put too significant of a dent in the demand.”

Ripple effect

Much of the supply challenges comes from transportation with a 30% shortage of available truck drivers around the country, Murphy said. Other products, such as produce, take up truck capacity.

“A lot of our suppliers have moved over to rail to try to get the material moving,” he said. “Now there is a shortage of rail cars.”

The largest challenge at East Coast Lumber & Building Supply Co. comes with trying to forecast future demand. The company does about 70% of its business with contractors and about 30% with retail customers.

“It is kind of like hot potato. You don’t want to get stuck with it,” Murphy said. “We can buy a load of material that might cost us $50,000, but if the market starts to drop before it gets to us, it is only worth $40,000. You have to follow the market.”

Other products such as kitchen cabinets and windows are back-ordered.

Murphy said he doesn’t remember a time like this is his 28 years in the industry. Other disruptions such as the Texas freeze and California wildfires have also impacted costs.

Balancing act

No one knows when sales will normalize. The number of workers in the lumber industry is also down from 15 years ago, which limits the amount that can be produced, Wilde said.

“You can’t just immediately hire 30,000,” he said.

Harnois said some markets overseas could open up, which would help lower costs. The New Hampshire Home Builders Association is working with Congress to help come up with solutions.

Some projects might be delayed as the market settles, Murphy said.

“If buying the lumber starts to slow down, inevitably the price starts to soften,” he said. “The question is: Will it ever come back to where it was a year ago? That will be hard to say.”

Baier expects costs to remain up for at least another year and a half.

Wilde expects prices to continue to rise throughout the summer. Low interest rates have also played into the demand for housing and building new homes.

Once the rate increases, the demand will then start to taper, Wilde said.

“It will allow the supply — in markets like lumber — to catch up,” he said. “Until you have that, it is hard to see why there would be a letdown in demand. And there is really not much you can do about supply. The supply is what it is.”

Recently, Baier stopped giving estimates for some projects, including building a two-car garage. The cost of materials will fluctuate too much between now and when construction could start, Baier said.

“My clients are better served by me being honest with them and saying something like, ‘There is no way I can tell you what it is going to cost,’” he said.

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