Homebuilders under pressure as material costs go through the roof
Plywood, sheathing and lumber prices have tripled across Canada
From homebuilders to backyard renovators, many Canadians have been feeling the impact of the price of lumber and other materials doubling or tripling during the pandemic.
Roy Nandram knows all too well.
The builder and former president of the Greater Ottawa Home Builders' Association has been watching his material costs spike on a nine-home development in the Experimental Farm area.
Two by fours that cost him $3 in January 2020 are more than $10 each now. When he adds up the current material cost on a 2,000-square-foot house, he sees $18,000 in new expenses that must come out of his own margins.
At the same time, every house has jumped in value.
"We'll be happy if some of [the buyers] walk away because we could sell these homes for at least [a hundred thousand] or $150,000 more," said Nandram.
Prices going up, stock dropping
Victor Jung decided to replace a deck at his Val-des-Monts, Que., home this spring with wood from a sawmill specializing in eastern cedar in Bouchette, Que.
However, in the seven days between placing his $3,500 order and picking it up, prices had already increased and stock had nearly vanished.
"It was quite funny because he said he's never had orders from Tadoussac and Rimouski before," said Jung.
It's the same unfamiliar volatility Paul McElligott at Casa Verde Construction has been experiencing.
"When I get quotes for cedar decking, I'm being told that I have three to four days to act on that price and that it could change — and it usually does!" said McElligott. "It's a little crazy."
Plywood in demand
Lumber isn't the only building material skyrocketing in price. A sheet of ¾-inch spruce plywood that cost $35 before the pandemic is $112 this month.
Bourhan Hamad recently discovered how valuable plywood has become.
High-resolution video surveillance shows two men in an aging pink Chevy Silverado pulling up in front of Hamad's Ottawa hair salon.
In broad daylight, the pair strolled across his yard, lifted up the plywood ramp Hamad had been using to ease his renovation project and slid it into the waiting truck.
Hamad said he was doubtful of seeing his ramp again.
'It's impossible to run a business that way'
"I don't think everybody would have predicted a worldwide pandemic would have caused a worldwide housing boom," said Kevin Lee, CEO of the Canadian Home Builders' Association.
"It's astronomical."
Lee points to the skyrocketing price of oriented strand board (OSB) often used as sheathing in new construction, jumping from $300 for 1,000 square feet last year to $1,800.
Lee says builders are adding price-escalation clauses to protect themselves.
"It's one thing when prices go up five to 10 per cent, but when prices are doubling it's impossible to run a business that way," he said.
Could return to normal later this year
It's the law of supply and demand that has converted building material centres from lumber barons to lumber barrens.
Millions of homebound people with money to spend turned their energy to new decks, fences and home improvements leading to a spike in demand. The pandemic pulled the plug on many North American sawmills, reducing supply.
Bank of Montreal economics forecaster Art Woo said a forest products company that wished to cash in on the lumber boom today might nonetheless still not be producing any actual lumber from that mill for two to three years.
"A lumber company can't just open up 10 new sawmills," said Woo, illustrating the inelasticity of supply.
However, Woo called the current lumber prices "unsustainable" and his office's latest commodities forecast has prices beginning to return to normal later this year.
