Lumber prices soar

Homebuyers, builders feel impact of doubled, tripled costs

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— Homebuyers and home builders should expect to pay more when building a new house.

Lumber prices have soared -- some materials have tripled in price since last year -- thanks to steadily increasing demand, a supply that can't keep up and the will of Mother Nature. Last week was the first since early spring that prices have stayed level instead of increasing, building suppliers said.

Plywood products have seen the biggest increase, with prices up more than 27 percent between July and August and 61 percent from a year ago, according to Random Lengths, a Eugene, Ore.-based newsletter that tracks the lumber industry.

A plywood alternative, oriented-strand board, or OSB, is a popular choice for wall sheeting, Alpine Lumber Manager Skip Dierdorff said. The choice size for most builders is 7/16-inch, for which prices have tripled in the past six months.

A piece of 7/16 OSB was about $7.50 in April, Dierdorff said. Now, the same piece costs almost $23.

BMC West and Steamboat Lumber also reported that the price of OSB has tripled and that dimensional lumber has doubled in price from earlier this year.

Record prices

Sue Brandt has been in the lumber sales business for 38 years and is now a sales associate with a Denver office of Georgia Pacific, the largest supplier of lumber and building products in North America. She said the current prices, particularly of OSB, are the highest she has ever seen.

"The prices were pretty high in '99 during the hurricane season, but definitely not as high as this," Brandt said. "The prices have been going up and up since March."

Hurricane Isabel, which caused an estimated $1 billion damage on the East Coast, is just one of several reasons economists cite for the high cost of lumber, Georgia Pacific spokeswoman Robin Keegan said.

"The weather is a factor in several ways," Keegan said. "Fire or the potential of fire in the dry areas of the West have kept our loggers out for safety reasons. That's part of the reason for our low log inventory. In the South, it's been the opposite. It's been one of wettest years ever. We won't go in there either, because of the possibility of damaging vegetation and causing erosion."

In the South, it also has been too wet for construction to continue at full speed, and now builders are trying to catch up, adding to the increased demand, Keegan said.

Also, development slowed in the wake of Sept. 11, 2001, lessening the need for lumber to the point that many dealers kept low inventory. When development began picking up again around the country, Western wildfires had ignited, Eastern rains followed, and lumber dealers began scrambling to order lumber, Keegan said.

Low inventory

The inventory of lumber at BMC West was all but depleted this summer, BMC Manager Rod Wille said. He said his supplier, Georgia Pacific, was so backed up on orders at one point that he couldn't get lumber at all.

BMC had to look for an alternative supplier, which it found through a company called Riley Creek. Riley Creek's Idaho mill began delivering lumber by rail, which Wille said lowered the price of lumber by adding fewer transportation costs, because trains could unload lumber in BMC's back yard. BMC was able to pass along the savings it got from rail transport on to its customers, Wille said.

At Alpine Lumber, large orders for OSB took six weeks to deliver while inventory was completely diminished for days at a time, Dierdorff said.

"That never happened before," he said.

With dimensional lumber prices also climbing, the cost of framing a house rose this year from $10 to $12 per square foot, to $14 to $16 per square foot, Dierdorff said. That has caused several homebuilders to temporarily halt their projects in hopes that prices would drop, he said.

"I'd be concerned if I was building a house," Wille said. "(Buying lumber) is like the weather forecast -- they say it's going to be bright and sunny tomorrow, but you really just never know."

Some contractors who secured low prices through purchase-order agreements before prices soared have avoided the brunt of the increase.

Tom Fox, owner of Fox Construction, and independent contractor Keith Wilson said they started their most recent projects before the price spike.

"We haven't gotten the rubber band snapped in our fingers," Fox said. "But we just happen to not be framing right now."

Alpine Lumber, however, has not been able to honor some of its long-term quotes, Dierdorff said.

"Our prices have had to go up," Dierdorff said. "Our price quotes might not mean anything today if the builders don't get started today. It has been a learning experience for builders."

The market

Several local suppliers attributed the price increase, in part, to the need for wood in Iraq to build bunkers and rebuild Iraqi towns. But Keegan said even though the federal government ordered more than 24 million feet of lumber products from American companies, that order was not significant enough to affect the U.S. market.

Georgia Pacific shipped thousands of extra plywood panels to the Eastern Seaboard before Isabel hit, and since then it has sent even more panels and dimensional lumber to areas affected by the hurricane. Keegan said that shipment hasn't affected the market either.

The latest surge of residential, commercial and industrial development is the largest factor driving the market now, Keegan said.

Last week was the first since early spring that lumber prices have leveled off, said Dierdorff, who has been explaining to his customers that lumber prices will never stay constant.

"It's not an easy conversation to have with your customers that prices are going up," Dierdorff said. "No one enjoys that type of conversation. We deal primarily with contractors, who are professionals too, and they understand this is a fluctuating market. We know as well as they do, this is only a temporary setback."

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