Lumber Prices Have Fallen Since an All-Time High in May - Will Construction Costs Drop Too?
Construction costs have ballooned over the course of the COVID-19 pandemic, with prices for raw materials up and labor in short supply. Do recent market trends indicate a more affordable future for construction?
With labor and materials shortages experienced across the board, everyone from a city looking to build a bus stop to someone looking to redo their kitchen is likely to feel the pinch for the foreseeable future.
The price of lumber skyrocketed to a high of over $1,600 per thousand board-feet in early May, but dropped almost as quickly, and is currently around $550 for that quantity. In the year before the COVID-19 pandemic, prices hovered between $330-$450. In spite of prices beginning to stabilize, local construction experts say the falling price of lumber doesn't tell the whole story when it comes to how much a project will cost.
Darlene Carter is the Division President of Utah real estate developer C.W. Urban and is currently constructing a 38-unit complex called “The Village” in Silver Creek. She says the price of lumber is just one piece of the puzzle to the final cost of construction. Other shortages of what she calls “wood-engineered products” like plywood and particleboard that require other materials and labor to put together also factor into price increases, which she says are between 10-20% across the board.
“Will we see some softening? Yes,” she says. “Have I been able to cut that budget by 60% like the news articles would suggest? Absolutely not, but I’m looking forward to a future [where] lumber is a little bit more modestly priced.”
The rising cost of building materials was also cited as one reason the price increased for Park City’s proposed arts and culture district. Initial estimates of around $70 million grew to over $100 million.
For people looking to do home improvements themselves, prices at the Home Depot in Park City are set by the corporate offices in Atlanta, Georgia, and follow current commodity prices.
According to the company’s May quarterly earnings report, Home Depot President & COO Ted Decker characterized the situation as a “storm environment.” He said demand is high and supply chain issues have more to do with labor capacity at sawmills and other processing facilities as opposed to shortages in raw materials.
In June, Park City Engineer John Robertson asked the city council to delay the bidding process for several city projects until the fall, citing uncertainties in labor and material costs. He says although lumber has begun to stabilize, prices for other materials like steel and plastic pipes have also gone up, and local labor issues are continuing with the recent rise in COVID-19 cases.
“It’s really a combination of both,” says Robertson. “We contract out with contractors to do construction projects, so it’s their labor that they’re dealing with that they’re not finding enough staff to do projects within the timeframes we’re looking for. That’s where I see the biggest issue. I haven’t seen material costs impact our projects too much yet. For me and the impact to us getting our projects out, it’s been a labor issue I think more than anything that’s kind of creating the problem for us.”
Robertson adds he is confident projects set for next spring that include roadway reconstruction on Rossi Hill in Old Town and sidewalk improvements throughout Park City will be on schedule to accept bids in the fall.