Exploring growth trends & cultural shifts
Rising lumber costs, decreased supply yield headaches for builders and customers
Whether you’re a large contractor with job sites throughout Madison County or a homeowner who’s trying to build a house for your young family while staying within budget, it’s the same frustration: building costs have soared, supply has dwindled and it’s hard to plan for the future.
On the national level, “the change in lumber costs between April 2020 and April 2021 added more than $35,000 to the price of an average new home,” according to Linda Revenaugh, executive officer of Southwest Montana Building Industry Association. “Builders are dealing with widespread shortages not only of many materials, but also of labor, as the number of open construction jobs nationally increased to 357,000 in April,” she noted.
If you were to ask Ennis Lumber co-owner Kyle Marsh if he agrees with this assessment, his answer would likely be a resounding “yes.” In fact, said Marsh, those trends may be even more pronounced in rural areas like Madison County.
“No matter what you buy, it has to come in on a truck. Freight prices are higher in rural areas like ours,” Marsh explains. “For us, for some lumber items, prices have been six times higher than before Covid.”
While commodity prices have shown a slight dip in recent weeks, Marsh says change at the source point hasn’t translated to retailers yet. Since prices climbed so high in the last year, they have a long way to go before they are back to pre-Covid numbers. Lumber prices more than doubled between May 2020 and May 2021, according to the U.S. Dept. of Labor producer price index.
“On paper, prices have gone down slightly. In reality, because of shortages, we haven’t seen lower prices yet,” Marsh says.
What’s the reason for these shortages that ultimately mean higher costs? A number of factors could be converging to make building materials both scarce and expensive:
• Pent-up demand – Covid may have changed both working and lifestyle patterns. We’re seeing the effects of this phenomenon in Madison County. Both employers and employees have adjusted to the idea of working remotely, freeing up many people to move to places with an outdoors appeal like Montana. More demand for housing in spots like Madison County means more need for lumber to build or renovate houses, placing pressure on builders and suppliers alike.
• Supply chain interruptions – Many sawmills and factories were shuttered during the worst of the pandemic. While manufacturing operations are resuming, there is a big gap between board feet being produced against long-standing orders.
• Slow deliveries – labor shortages are plaguing many businesses in Madison County, from restaurants to hospitals. The trucks that bring building materials from the sawmills to local builders have to be driven by certified drivers, and they are in short supply – by some accounts by nearly one million drivers.
“One of my customers waited a year to have custom windows built and delivered,” said Scott Gossard, owner of JDL Construction in Sheridan.
“This climate is definitely a challenge to my business,” says Gossard, who bought the 43-year-old company in 2017. “You can quote your best estimate to a customer, but you can’t know how long it will be accurate.”
Gossard says if lumber prices are coming down, he hasn’t seen it yet. “This volatility has had a significant impact on customers. Some homeowners have delayed projects because of high commodity prices.”
He adds that labor shortages throughout the industry compound the situation. “We’re advertising nationally on websites like Indeed, and on Facebook,” Gossard says, noting he would like to fill a number of open construction jobs.
Homebuyers and people building custom homes are being shaken by building trends.
Brenda Funke grew up in Ennis. She and her husband, Cameron, bought land in Ennis in early 2021 and started building a home for themselves and their two children this spring.
“Budgeting has been tricky,” Funke said. “Our builder expected price increases and added 15% on top of our budget. Still, we had to give up some features, such as peaks on the house because of lumber costs.”
They’re also experiencing delays due to shortages and slow deliveries. The Funke’s roofing is on back order, and there’s a six-month wait on cabinets.
Funke says she and her husband have been able to handle the uncertainties around price and timeline for two reasons. “Local businesses have been great about working with us. Finish Factory, a local supplier of cabinets, alerted us about expected price increases in time to place our orders before they went up.”
Secondly, she and her family are grateful to own a nice piece of land, and they know the house, when completed, will be a wonderful home.
“We stay busy with work and with my daughter rodeoing, and know it will happen,” she said.
Have the high prices and long construction timelines deterred people from buying or building homes in Madison County?
Not really, according to Dawn Myrvik, a realtor with Pure West in Ennis. While the pace of real estate transactions doesn’t seem to have slowed down, she says “some buyers have decided to buy homes instead of building right now. Others may be waiting to start building when things adjust a little, but sales of land and homes remain very strong.”
“We do have a shortage of inventory,” Myrvik notes.
Will the future bring stabilization and a return to “normal” times for Madison County’s important building industry? The forces at play are not likely to retreat soon. Demand will probably continue while labor and supply shortages remain. Inflation is another wild card.
In the meantime, as Scott Gossard said, you recognize the realities and “always be transparent with clients and communicate what we’re seeing in the market now.”
Next week’s The Madisonian will look at how Madison County employers are managing around a labor shortage.