Lumber crash results in ‘blowout’ gross sales as costs crater

Homeowners who resisted the urge to renovate in the course of the first 18 months of the pandemic could discover now could be their probability, as lumber costs that soared to dizzying heights within the spring have crashed again all the way down to earth.

At family-run Peacock Lumber in Oshawa, Ont., proprietor Glen Peacock mentioned retail costs have “collapsed” in latest weeks. An eight-foot-long, two-by-four inch piece of framing lumber that value $12.65 on June 1 is now promoting for $3.95, Peacock mentioned — principally what it could have bought for earlier than the growth.

“It was amazing it went as long as it did before people said `this is too much money,’ ” Peacock mentioned. “People who waited, if they could, to do their projects are going to be in a much better position.”

A pandemic-driven surge in house renovations and do-it-yourself initiatives despatched shock waves via the house enchancment and building industries earlier this yr. North American lumber costs hit report highs of greater than $1,600 US per thousand board ft in May — thrice larger than pre-pandemic ranges.

The value roller-coaster had prospects pre-ordering lumber months upfront to make sure provide and even resulted in a spate of opportunistic thefts from building websites throughout North America.

But the journey has come again down even sooner than it went up and that means many retailers have been caught making an attempt to eliminate product they bought at larger costs.

Many lumber yards have drastically in the reduction of on manufacturing till the backlog of unsold wooden strikes. (Robert Short/CBC)

“With lumber prices falling as fast as they did, it forced everybody to sell their overpriced inventory at a loss,” mentioned Joel Seibert, proprietor of Mountain View Building Materials simply outdoors of Calgary. “What would have been the ideal situation would be for the price to take twice as long to come back down as it did to go up.”

Liz Kovach — president of the Western Retail Lumber Association, which represents retail lumber, constructing provide and {hardware} shops in Western Canada — mentioned the pandemic value bubble burst with the arrival of summer time. Warmer climate and the easing of COVID-19 restrictions throughout the nation resulted in Canadians travelling extra and spending much less time on initiatives round the home, she mentioned.

Retailers slashing costs

“It’s been a challenge on the retail side,” Kovach mentioned. “We’ve seen a lot of blowout price sales, just so that they can move the materials.”

The plunging costs have already led to curtailments and decreased operations at sawmills. Vancouver-based Canfor Corp. mentioned on the finish of August that it will run all of its B.C. sawmills at 80 per cent capability till market situations enhance. Conifex Timber Inc., additionally primarily based in Vancouver, introduced Aug. 20 that it could curtail lumber manufacturing at its Mackenzie, B.C., sawmill for a two-week interval.

The fast rise in lumber prices earlier this yr added “tens of thousands of dollars per home” to new house building prices, mentioned Kevin Lee, chief govt of the Canadian Home Builders’ Association. And while customers could already be benefiting from decrease costs at house enchancment shops, homebuyers signing new building buy contracts are nonetheless seeing elevated costs.

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“Builders still have to clear their inventories of having purchased higher-priced lumber. It takes a while to clear the system,” Lee mentioned. “Yes, lumber prices from the mills came down dramatically over the summer, but that’s unfortunately taken a while to reach the rest of the industry and consumers.”

Lee mentioned when it involves new house building, pricing is being difficult by ongoing pandemic-related provide chain challenges. While difficulties associated to lumber have eased, homebuilders are nonetheless dealing with supply delays and value inflation on all the things from plumbing and electrical merchandise to kitchen cabinetry.

“It doesn’t compare to the three to five times price increases we saw with lumber, but I’d say on average we’re seeing 10 per cent increases on everything including the kitchen sink,” Lee mentioned. “And we are still seeing delays on closings, just because of an inability to get products and materials.”

In a word to shoppers earlier this week, RBC Dominion Securities analyst Paul Quinn mentioned with the arrival of fall, lumber markets are already starting to tick barely larger. Home centres are noticing elevated visitors as prospects attempt to end initiatives earlier than winter, Quinn mentioned, and retail demand tends to be a number one indicator for lumber pricing.

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