Construction Material Costs - When Will It End?

Placemotorsports said:

There is also a national pallet shortage going on at the same time.  Pine wood is hard to come by, the workforce that makes the pallets have dropped almost 50 percent and they can't even get the nails to build them if they could. 

I remember last year buying $6.25 pallets, $16 each today and they are back ordered 3 weeks. Definitely makes things interesting with the rapid price changes.
 

I'm struggling to adjust my pricing to reflect my rapidly changing costs and I'd say my business is light on materials. 

Rons said:

In reply to Keith Tanner :

However the price of aggregate is often way lower than the delivery charge. concerning lumber there's been pine beetle kill, wild fires, and other external factors that have reduced the fibre supply so there has been mill closures even in the last few monthes.

Delivery charge is driven by fuel costs, which are at about an average level right now. Or you pick up with your own trailer. I'm just saying - gravel hasn't changed. 

My bestie and I have been waiting to do a pergola on her back deck because a 4x4 post that should cost $8 is currently $30.

I just listened to a report on NPR's Marketplace about it.  The lumber supply is down some, but not quite as much as you might expect.  The retailers are being forced to balance two things right now; the supply/demand pricing (which should have prices approximately doubled from normal) and the market panic/perception if their shelves go empty.  It's not just that HD looks bad if they don't have lumber, it's that it can create panic buying, profiteering, and waste when dumb-ass Karens and Kens start hoarding.  It's not that Lowe's is altruistic in their betterment of society, but panic buying is terrible for business because it causes shortages, news stories, and bad press.

The pricing you're seeing on lumber is equal parts due to a slightly reduced supply from a shutdown of manufacturing about a year ago finally catching up in the supply chain, and equal parts "whoa, dudes, let's slow this roll" demand issues.

You probably remember in June/July of last year the retail market didn't react fast enough and the lumber shelves at HD and Lowes were nearly empty, and there were lines outside the doors hoping for a 2x4.

Everyone is always so quick to blame the market, the retailer, or the situation, but easily 75% of the equation is the conglomerate group of humans known as consumers.... US.  Retailers and suppliers know what they're doing in most cases.

Put it this way... retailers, wholesalers, suppliers, and manufacturers' entire job all day every day is knowing their business, the market, and supply/demand.  They have access to hundreds of years of history in metrics, computer models, and it is literally their job to know the market.  Consumers on the other hand have Karens hoarding toilet paper and putting gasoline in rubbermaid  totes.  We're not very savvy consumers as a whole.

Streetwiseguy said:

A great deal of Canadian lumber comes from British Columbia, and they have locked down really hard through Covid.  Lotsa stuff shut down out there.

The cross border thought might contribute a bit, but lumber is horribly pricey up here too.

I work at a BC sawmill and we stayed running the entire time, as manufacturing was declared essential, but others did take shutdowns in the past few years and some mills have closed in recent years, limiting supply. In this little area, there's only enough log supply for about 80% of our mill capacities. Here anyway, where most wood harvested comes from government land, that's one of the bigger supply constraints (not trying to be political, just stating what I've been told about it from people in the know). 

Lumber tarrifs on Canadian wood is also driving up costs for consumers and has been a factor in mill closures in Canada, limiting supply.

Barrons did a piece on this just the other day with a fellow from the lumber industry.

Apparently during the last housing crash, the sawmills scaled back production and never really ramped it up again because supply was meeting demand.

Covid hit and people started doing all those home jobs they've been putting off, construction started to increase and the mills shut down or went to reduced shifts because of Covid.

The reserve supply got used up and now we're playing catch up.

I live in B.C. and yes, the borders are closed and we've got a lot of lockdowns. I had to go to Alberta to deal with family stuff and drove by two sawmills that were being torn down. They won't be replaced because the eco-nazis where I live don't understand that we have a resource based economy in B.C. and if we don't log, mine or fish, there's no work.

Curtis73 (Forum Supporter) said:

You probably remember in June/July of last year the retail market didn't react fast enough and the lumber shelves at HD and Lowes were nearly empty, and there were lines outside the doors hoping for a 2x4.

Everyone is always so quick to blame the market, the retailer, or the situation, but easily 75% of the equation is the conglomerate group of humans known as consumers.... US.  Retailers and suppliers know what they're doing in most cases.

Put it this way... retailers, wholesalers, suppliers, and manufacturers' entire job all day every day is knowing their business, the market, and supply/demand.  They have access to hundreds of years of history in metrics, computer models, and it is literally their job to know the market.  Consumers on the other hand have Karens hoarding toilet paper and putting gasoline in rubbermaid  totes.  We're not very savvy consumers as a whole.

You can't react instantly to a step change in demand. First, you need to recognize that you have an actual sustained change happening, as there's always a certain amount of noise in the data. Then you have to get your inventory, and if you're ordering large quantities or this inventory is special for you the lead time could be 6 months. And of course, your supplier has to be ready to react as well. Throw in supply chain problems and it's no wonder we're seeing shortages.

We've suffered from this. The last year has been very good for the automotive aftermarket, probably for the same reasons the home improvement sector has benefited. And we do have products that take 6 months to get delivered under normal circumstances. We're still struggling with it.

If anyone is interested in learning more about the challenges/surprises in supply chain dynamics - I recommend reading about and playing "The Beer Game" . These recent Covid anomalies and the challenges with toilet paper, vaccine distribution, chips for Fords, plywood and gasoline - are all great examples of real world Beer Game events.

mazdeuce - Seth said:

Is building demand that inelastic that materials prices don't matter to builders? I think that's what's most confusing to me. 

It's not that it's inelastic , it's that the lead time is in the several months and there is so much demand that if one client doesn't want to pay for materials one of the next several will and now you are way down the list. Some people are really impatient.

I personally have told a few clients to just wait it out a bit. I have an addition and a big roof to do for one client and the lumber prices have jumped his bid a lot. I almost always bid time and materials and make the client pay for materials themselves especially for situations like this.

Our housing market is insane right now though too, this area is considered the hottest market in the US right now and the phone calls I've been getting back that up. I could be much more busy if I wanted to be, but I don't.

Antihero (Forum Supporter) said:

mazdeuce - Seth said:

Is building demand that inelastic that materials prices don't matter to builders? I think that's what's most confusing to me. 

It's not that it's inelastic , it's that the lead time is in the several months and there is so much demand that if one client doesn't want to pay for materials one of the next several will and now you are way down the list. Some people are really impatient.

 

I personally have told a few clients to just wait it out a bit. I have an addition and a big roof to do for one client and the lumber prices have jumped his bid a lot. I almost always bid time and materials and make the client pay for materials themselves especially for situations like this.

Our housing market is insane right now though too, this area is considered the hottest market in the US right now and the phone calls I've been getting back that up. I could be much more busy if I wanted to be, but I don't.

I guess I actually know that. My brother in law is having a pole barn built. It's something like $10k over the estimate he got 9 months ago. Builder said he could back out but the back of the list is two years away. So he just spent the extra $10k. I though it was just him. Must be a lot of hims. 

In reply to mazdeuce - Seth :

There are a lot of hims.

Someone I know got a bid on a huge pole barn and his new bid is 32k more apparently. It's a massive pole barn but it sounds like the original bid wasn't that good to begin with. He's gonna pay it because he called around and couldn't find anyone to do anything this year.

I think the pole barn guys are gouging as those are more air and steel than lumber. There are some local guys staying close to pricing and other guys giving out some crazy ones due to demand and then blaming the pricing on materials.

Sparkydog said:

If anyone is interested in learning more about the challenges/surprises in supply chain dynamics - I recommend reading about and playing "The Beer Game" . These recent Covid anomalies and the challenges with toilet paper, vaccine distribution, chips for Fords, plywood and gasoline - are all great examples of real world Beer Game events.

Skimming through, that's a pretty interesting link. I might pass that around the company after digging in a little deeper. Thank you.

I'd like to point out that my official title at FM actually includes "director of systems". Looking at the big picture is a big part of my job.

Paul_VR6 (Forum Supporter) said:

I think the pole barn guys are gouging as those are more air and steel than lumber. There are some local guys staying close to pricing and other guys giving out some crazy ones due to demand and then blaming the pricing on materials.

Yeah I think this guy is the latter and is doing the super shady thing of giving a low bid and then trying to get more money when the job is half finished. Now he can really gouge because the people don't have a choice, or at least don't have a choice they like.

I bought some 8ft long / 42 inch tall picket fence sections at Lowes on Monday for $34 each , They were $32 about 10 years ago when I bought the ones I am replacing now , 

Yeah there is not much wood in a picket fence section , but I am glad it was not 2-3 times more , if it was going to be that much more I would have waited , 

Good luck to you guys that are buying truckloads m the price rise has got to hurt bad !

Keith Tanner said:

We've suffered from this. The last year has been very good for the automotive aftermarket, probably for the same reasons the home improvement sector has benefited. And we do have products that take 6 months to get delivered under normal circumstances. We're still struggling with it.

Ah yes. That would explain why you are out of the lower control arm bushings I'm looking for. 

Snowdoggie (Forum Supporter) said:

Keith Tanner said:

We've suffered from this. The last year has been very good for the automotive aftermarket, probably for the same reasons the home improvement sector has benefited. And we do have products that take 6 months to get delivered under normal circumstances. We're still struggling with it.

Ah yes. That would explain why you are out of the lower control arm bushings I'm looking for. 

Good example! Those come from...Germany? Poland? Europe, anyhow. 3 month lead time normally and lots of perturbations at the supplier end of late. And seriously, April was nuts. 

Keith Tanner said:

Sparkydog said:

If anyone is interested in learning more about the challenges/surprises in supply chain dynamics - I recommend reading about and playing "The Beer Game" . These recent Covid anomalies and the challenges with toilet paper, vaccine distribution, chips for Fords, plywood and gasoline - are all great examples of real world Beer Game events.

Skimming through, that's a pretty interesting link. I might pass that around the company after digging in a little deeper. Thank you.

I'd like to point out that my official title at FM actually includes "director of systems". Looking at the big picture is a big part of my job.

"Systems Thinking" (Which I first encountered in reading Peter Senge's "The Fifth Disipline") is also very useful.

I was talking to my lumber supplier yesterday.  He told me the roof deck we did last fall for ~$5,000 would cost over ~$23,000 today.

My bids now are only good for 5 business days.

Starting to wonder if maybe "alternate materials" may become affordable...

2x3 8 footers are now a real option.

In reply to Appleseed :

For what??

Maybe I should sell my house for parts...

Is everything else up as well because suppliers say "hey, as a concrete producer, we know people are going to think about using more concrete and less wood because wood is expensive, so we'll bump up our rates to be only slightly cheaper than wood."

pheller said:

Is everything else up as well because suppliers say "hey, as a concrete producer, we know people are going to think about using more concrete and less wood because wood is expensive, so we'll bump up our rates to be only slightly cheaper than wood."

Not here but they are saying that they expect rationing and won't be accepting new clients or apparently anyone other than contractors

Keith Tanner said:

Curtis73 (Forum Supporter) said:

You probably remember in June/July of last year the retail market didn't react fast enough and the lumber shelves at HD and Lowes were nearly empty, and there were lines outside the doors hoping for a 2x4.

Everyone is always so quick to blame the market, the retailer, or the situation, but easily 75% of the equation is the conglomerate group of humans known as consumers.... US.  Retailers and suppliers know what they're doing in most cases.

Put it this way... retailers, wholesalers, suppliers, and manufacturers' entire job all day every day is knowing their business, the market, and supply/demand.  They have access to hundreds of years of history in metrics, computer models, and it is literally their job to know the market.  Consumers on the other hand have Karens hoarding toilet paper and putting gasoline in rubbermaid  totes.  We're not very savvy consumers as a whole.

You can't react instantly to a step change in demand. First, you need to recognize that you have an actual sustained change happening, as there's always a certain amount of noise in the data. Then you have to get your inventory, and if you're ordering large quantities or this inventory is special for you the lead time could be 6 months. And of course, your supplier has to be ready to react as well. Throw in supply chain problems and it's no wonder we're seeing shortages.

We've suffered from this. The last year has been very good for the automotive aftermarket, probably for the same reasons the home improvement sector has benefited. And we do have products that take 6 months to get delivered under normal circumstances. We're still struggling with it.

You are entirely correct and I failed to mention the instant-change factor of the pandemic. I was referring more to the current pricing as it relates to the recovering supply chain/demand and how retailers are adjusting.

Purple Frog (Forum Supporter) said:

I was talking to my lumber supplier yesterday.  He told me the roof deck we did last fall for ~$5,000 would cost over ~$23,000 today.

My bids now are only good for 5 business days.

Starting to wonder if maybe "alternate materials" may become affordable...

last fall I did estimates for a friend on 84' of fencing.  Rough numbers using materials and friend-pricing labor, I could have done it for:

$2800 PT/dogear sections
$4600 vinyl
$5400 aluminum.

Today, you can almost reverse that.  Aluminum is now cheaper than most PVC fences, and getting close to PT.  The people who came to give estimates (now that I'm too busy to do it) never even offered PT as an option.