Why are lumber prices so high? Supply down, prices up

If you’re wondering what’s going on with lumber, it’s pretty simple, according to local lumber sellers.

“Supply is down, and prices are up. It’s almost astronomical,” says David Linam, an associate at Alvey Lumber in Manti.

Robert Stevens / Messenger Photo
Starla Wilford, manager at Alvey Lumber in Manti, stands beside nearly empty lumber storage compartment. Because of 200 to 400 percent price increases (wholesale and retail), and uncertainty about the public’s willingness to pay the prices, Alvey has cut its inventory.

On a lumber package for an average new home, the customer needs to add $25,000 to $30,000 from any price quote he or she received a year ago, Liam says.

“At the end of last year, we thought we had seen the high,” says Brett Butterfield, co-owner of Skyline Builders Supply in Ephraim. Since then, he says, prices on various lumber products have climbed to as much as four times previous averages.

Chet Nipko, lumber manager for Horseshoe Mountain Hardware in Mt. Pleasant, has been in construction his whole career. He’s been at Horseshoe more than seven years.

“Lumber, depending on who you talk to, has taken a 300-500 percent increase,” he says. “It’s unprecedented.”

For retailers, the biggest struggle has been figuring out how to get product in. Different stores are taking different approaches.

National distributors, such as Boise Cascade and Weyerhaeuser, are “allocating” lumber products to customers. That means they will only sell stores such as Skyline and Horseshoe Mountain the same amounts of the same products that they bought last year.

The suppliers even break their allocations into quarters, Nipko explains. They will only sell him the same volume of goods Horseshoe bought in the same quarter of 2020, and delivery of products has to be spaced across the quarter.

Skyline sells primarily to the construction industry. So it is “allocating” supplies itself. The store has turned down new contractors and “homeowner builders” in favor of “contractors and framers we already sell to.”

For its part, Horseshoe Mountain is telling its customers not to buy lumber until they’re ready to use it. “We’re telling people, ‘Come and see us when your foundation is in,’” Nipko says. And when customers do come in, the staff is telling them, “You take your lumber right now.”

At Valley Builders in Gunnison, owner Brent Jensen is also allocating his products to longstanding customers. But he says shortages have reached the point where he takes goods if he can get them, regardless of price. “If you want to stay in business, you have to have something to sell,” he says.

Alvey Lumber in Manti is taking a quite different approach. Because of the cost of products, and uncertainty as to how quickly the store can sell them at current prices, the store has cut its inventory, Liam says. “We’re not purchasing any surplus, just buying what we need as we need it.” Yet, he says, “we’ve been cleaned out a couple of times even at the higher prices.”

Investorplace, a website that reports on economic trends, says the main cause of historic price increases is a lumber shortage.

There are several causes of the shortage. One is low interest rates, including low mortgage interest rates, which are triggering exceptional demand for homes.

Another problem is that many lumber mills in the Northwest and in Canada reduced their staffs, or even shut down, during 2020 to protect their workers against COVID-19. That reduced production right at the time demand started to increase.

Meanwhile, bark beetle infestations and wildfires have cut into the Canadian supply, and the United States imports a significant share of its lumber from Canada.

What happens from here?

“We’ve been able to stay busy and be successful,” Butterfield says. But “we’re starting to see more people say, ‘We’re going to wait.’ That has the potential to make things very slow.’”

Nipko says, “We’re doing our best to stay competitive and help our consumers.” Sometimes if the price of the product a customer needs is too high, his staff can recommend a substitute product.

But that’s a short-term fix, because as demands for the substitutes increase, those prices go up, too.

“I don’t believe current prices are sustainable,” Nipko says, but no telling when they will go down.

“It would be refreshing,” he says, “just to see them level off” rather than continuing to rise.