A near-record spike in the cost of lumber could soon add thousands of dollars to the price of a new home.
Lumber prices have soared as high as US$900 per thousand board feet, double the typical price range. Those are wholesale prices before shipping costs and retail markups.
Steve Bontje, managing partner of Laebon Developments Ltd., said there is typically a six- to eight-week lag from the time he buys wood to the time of delivery, so the recent price leaps will not be felt for some time.
“That pricing is just starting to work its way into the system now,” he said. “The prices we have locked in this month were locked in before all this happened.
However, if prices remain high into September and October, builders will have no choice but to pass them on, said Bontje.
“I’ve certainly seen people talking about $10,000 or $15,000 a house. I don’t know if it will be that drastic, but if the cost of inputs go up, there’s kind of only one thing that can happen.
“If the price of lumber doubles, it’s going to cost the homeowner twice as much (for materials).”
When home builders may have to boost their prices will depend on their suppliers, inventory and other factors, said Bontje.
“I don’t suspect this is a new normal for us, but I don’t know how long it will last.”
Alberta Forest Products Association spokesman Brock Mulligan said the high prices are good news for Canadian lumber producers, companies such as Sundre Forest Products.
The province’s $7-billion forestry industry supports 40,000 direct and indirect jobs and more than 70 communities are dependent on the industry, including Sundre and Rocky Mountain House.
“It is good news, but at the same time, we’re cautiously optimistic, because the prices are not sustainable at the level they are now. They will come down,” said Mulligan.
“But for the people who work in the forestry industry right now, strong prices for the commodity you sell is good news.”
While the collapse of world oil prices has hit the province hard, communities with a strong forestry industry component had an “extra layer of insulation, and I think that has really helped out,” he said.
Mulligan said a number of factors came together to fuel the price surge. The pandemic created a strong demand for wood as people who were spending more time at home tackled renovation projects or replaced decks.
“The other thing is the home building market, despite COVID, has continued to be pretty strong around North America. We’re seeing (housing) starts going up.”
U.S. home starts soared 23 per cent in July, the biggest gain since October 2016.
At the same time, some lumber mills in B.C. and in some U.S. states shut down during the pandemic for economic or health-related reasons, which reduced supply.