When 2019 was getting ready to click over into 2020, there was already a problem brewing for local contractors, as the cost of basic building materials was increasing significantly.
It’s only gotten worse since then. Much worse.
“It’s a crisis, and it’s going to be for a while,” said Brenda Richards, executive officer of the Lakes Region Builders and Remodelers Association.
The problem of price increases dates back to 2017, when the Trump administration enacted a tariff on softwoods coming from Canada, which supplies much of the U.S. lumber needs. But 2020’s trump card – a pandemic – made those price increases look quaint.
“It started because of all the tariffs,” Richards said, “it started creeping up and then it exploded because of COVID.”
At Middleton Building Supply in Meredith, general manager Michael Mussen said that difficulty shipping over distances, especially across national borders, put a pinch on the availability of materials such as lumber and plywood. So, too, did temporary shutdowns of manufacturing facilities due to COVID outbreaks.
Those were the supply-side pressures, and then there was what has been happening on the demand side. Since the shutdown was put in place last year, people stuck at home decided it was finally time to build that new deck or addition they’d been thinking about, or people who lived in congested areas pulled the trigger on a dream home in the country.
“Demand is way up, supply is down,” said Mussen. The result, he said, “is basic macroeconomics.”
At Middleton, Mussen said the cost of items such as a sheet of plywood or an eight-foot-long two-by-four, each of which are used by the truckload to build a new home, have gone up by 10 to 20% over the past six months, and are double what they were a year ago.
Yet, said, Mussen, it hasn’t affected his business, which has continued to be brisk.
“The demand is so high,” he said. His customers face the price increases with an attitude he described as, “We need it, we need to get it done, we’ll pay.”
But how long will that approach last? In a letter to President Biden, dated Jan. 29, 2021, John Fowke, the CEO of the National Association of Home Builders warned that the construction sector, one of the few bright spots of the economy during the pandemic, could be hamstrung by material costs. The NHAHB estimates that recent increases in material costs add an average of $24,000 to new home construction.
“Housing can do its part to create jobs and lead the economy forward, but in order to do so, we need your help to address skyrocketing lumber prices and chronic shortages. We respectfully request that you reach out to domestic lumber producers to urge them to increase lumber production to address these shortages and to ask the Department of Commerce to investigate why production remains at such low levels during this period of high demand.” Fowke also urged the Biden administration to come to an agreement with Canada about increasing lumber shipments over the border.
Contractors are starting to see the price increases spread to non-lumber materials, too, said Ryan Laramie, project coordinator for Gilford-based contractors Wood & Clay.
“The most recent problems we’ve noticed is wiring and copper,” Laramie said, as well as the plastic boxes that electricians use to house outlets and light switches. There are scores of those in a large home, and they’ve recently jumped in price by a third, and that’s if they’re available.
Another recent headache is spray foam insulation, which Laramie said is used in every project Wood & Clay builds. That material is suddenly scarce due to the cold snap recently experienced in the Lone Star State.
“Texas makes a chemical that goes into spray foam insulation. With all the pipelines busted because of the cold temperatures, you can’t get spray foam now,” Laramie said.
Oddly, the price fluctuations haven’t scared away customers, Laramie said.
“We haven’t seen any cutbacks. If anything, we’ve probably gotten, on average, two requests a day to build somebody’s house or project of some sort. We’ve been able to pick and choose what we work on. I haven’t seen a slowdown. If anything, the houses are getting bigger and more lavish,” Laramie said.
And that trend is something that worries Richards, executive officer of the Lakes Region builders’ association. New entry-level homes have become unicorns in the region – perhaps the spiking cost of materials could close the damper on an overheated market, allowing things to return to balance, she said.
“It’s a little scary, but I’m an optimist. I think it will modify, and homes will do what they always do. This might be the thing that slows it down and brings it to a reality check,” Richards said. “It kind of has a cycle. I think right now it’s really hard to find a home that you can afford. Maybe it’s OK that it moderates at some point.”