Between mid-May 2020 and mid-August 2020 Canadian Lumber Prices skyrocketed. According to the Government of Canada weekly North American Lumber Prices, the cost per thousand board feet for Eastern 2”x4”s increased from $846 to $1723 ( that’s a 104% increase in 4 months!). Over that same time period OSB costs per thousand square feet increased from $564 to $1193 (up 112%). Consultation with local building contractor Lee Ganzert of HVR Construction indicated that the price for a standard 8 foot 2”x4” construction stud has went from $3.41 on April 29, 2020 up to $6.49 as of September 27, 2020 (up 190%). Even more surprising is the cost for a 3/8 inch 4’x8’ sheet of OSB has went from $11.93 on April 29, 2020 up to $32.95 as of September 27, 2019 (up a staggering 276%). This has caused some property owners to reconsider or hold off on some projects until prices come back down. Why have lumber prices increased so dramatically? As with any commodity – it’s a matter of supply and demand:
Strong new construction activity
Both in Canada and the United States, new housing starts were above economist expectations propped up by low interest rates, and strong demand. CMHC estimates in Canada there were 274,394 housing units under construction as of the 2nd quarter of 2020, up from 260,586 as of the same time in 2019 (a 5.2% increase).
Increased renovation activity
Due to the COVID19 pandemic, many homeowners opted to complete renovations to their properties, in an effort to spur a summer/fall sale, increase equity, and/or increase enjoyment of their property. In particular construction materials sought after for decks, fences, bathrooms were in very high demand.
Supply side issues
Across North America lumber mills experienced work disruptions and supply chain issues due to pandemic lockdowns. The lumber industry in British Columbia, in addition to COVID19 related issues has been adversely influenced by increases in stumpage fees, pine beetle infestations, and wildfires. As per Statistics Canada, softwood lumber production in BC was down 21% year over year during the first 5 months of 2020. Canadian combined hardwood and softwood production as of June 2020 was 12% below 2019 production levels.
How long will lumber prices remain this high? Ultimately time will tell.
By David Fortier, AACI, P.App, Bcomm (Dist.)
Fortier Mattila Appraisals Inc.