What the Yo-Yoing Cost of Lumber Tells Us About the Future of Home Building

What the Yo-Yoing Cost of Lumber Tells Us About the Future of Home Building

The price of timber is all over the place, but the need to build—and to build sustainably—isn’t going anywhere.

The building you’re sitting in right now is probably made of wood. The frame might be constructed from spruce, pine, or fir. Maybe the floors are oak, walnut, or cherry. The plywood partitions and walls probably use a combination of softwoods, and the cabinets could be built with decorative plywood using species like walnut, birch, maple, and mahogany. If you live in a big new apartment building, the structure might even be framed with mass timber, a composite material that’s gaining adoption as a strong, fire-resistant, and low-carbon alternative to steel. 

Over the last year, the price of all of these materials has gone through the cedarwood roof. 

Lumber has hovered between $300 and $500 per thousand board-feet for the past few decades. But in December, according to the National Association of Home Builders, it crossed $600. Then in January, it surpassed $900. It went over $1,200 in April, and peaked, at the end of May, around $1,500—an unprecedentedly fast and steep increase in costs for one of the most basic building blocks of the built environment. As of early July, the price had dropped down below $800 per thousand board-feet, but was still holding well above the pre-COVID norm. 

More trees are planted than harvested every year in the U.S., and strong lumber markets encourage more tree-planting, according to the American Forest Foundation.

The cause of the spike, industry experts say, was the sudden shutdown of sawmills in the United States and Canada when the pandemic hit North America, coupled with a relatively slow reopening under work-safe conditions. (Wildfires and beetle infestations, exacerbated by climate change, have also been longer-term factors in shaking up lumber supply chains, as The Atlantic reported.) The lumber industry, like many others, expected that the shutdown would wreck the housing market as the economy headed on a downward spiral. But while there was a pause in housing construction, American households found themselves spending lots of time at home, thinking about the improvement projects they’d never gotten around to. Many of those homeowners, aided by federal stimulus checks, raided Home Depot and Lowe’s for DIY building projects. And, with mortgage interest rates dropping and newly remote workers hungry for more domestic space, home prices surged, and the construction industry’s halt was short-lived. 

"Normally during a recession, demand slows down," says Brooks Mendell, CEO of Forisk, a forestry consulting and research firm based in Athens, Georgia. "That didn’t happen." 

Now, even with costs dropping as sawmills catch up with demand, industry insiders don’t expect lumber to permanently return to its pre-pandemic prices. Low prices will cause people who were waiting out the surge to restart the projects they paused, predicts Russ Vaagen, CEO of Vaagen Timbers, based in Washington state. Inflation could also be affecting the cost of lumber along with a range of other materials. Vaagen expects lumber to settle in a new trading range sometime later this year, and for it to be significantly higher than it was before the pandemic. 

The price surge suggests that housing, already much too expensive for many Americans to afford, is only going to become more costly. But it also shows the staying power of lumber as a renewable resource for building—and the need for a long-term commitment to more sustainable forestry practices. 

Russ Vaagen opened a facility to produce mass timber after running his family's sawmill for over a decade.

Developers have shown more interest in light-gauge steel and concrete over the last year, particularly for multifamily housing, but the costs of other materials have gone up as well, says David Logan, senior economist at the National Association of Home Builders. There are no readily available lumber alternatives for most home-building projects, he says. 

Over the long term, higher material prices could mean heightened competition for housing supply as new units grow more expensive to build. Brian Court, a partner at The Miller Hull Partnership, a Seattle-based architecture firm focused on sustainable design, says that project budgets have expanded by 50 to 100% because of lumber and other material cost increases. That has meant some projects being delayed or broken into phases. Tim McDonald, CEO of Onion Flats, a Philadelphia-based architect and developer, says the firm canceled an 88-unit project it was planning to build earlier this year, and the cost of lumber was what "tipped the scales."

"Let’s not forget that affordable housing is an oxymoron."

—Tim McDonald, Onion Flats

Any loss of new housing could increase demand for existing apartments and raise costs on tenants, nearly half of whom already spend more than 30 percent of their income on housing. The crisis highlights the urgent need for governments to fund more affordable housing projects—though this, of course, is far from simple. Already in California, according to the Terner Center for Housing Innovation at UC Berkeley, the cost of new low-cost housing projects is close to half a million dollars per unit. 

The Matt's Place Foundation broke ground in June on a net-zero house designed for people with ALS. The project, designed by the Miller Hull Partnership, was delayed several months while the team navigated the shifting cost of lumber for the building, constructed of cross-laminated timber.

"Let’s not forget that affordable housing is an oxymoron," says McDonald, who has also built projects with federal Low Income Housing Tax Credits. "It’s not affordable to build housing." 

It’s not often sustainable to build housing, either. Buildings are responsible for almost 40% of carbon emissions globally, with materials and construction accounting for 11% of the total, according to the nonprofit group Architecture 2030. Removing trees from forests to create wood products releases carbon into the atmosphere. There has always been a premium on materials that are produced using sustainable forestry practices, says Wes Sullens, director of the LEED program at the U.S. Green Building Council. Long-term price increases could "slow down the curve of adoption" for greener products, but the price surge of 2021 isn’t likely to change the longer-term trend toward mass timber and certified wood, Sullens says. 

"We’re on the cusp of a kind of age of enlightenment in terms of understanding the environmental impacts of materials," he says. 

It may become more expensive to build with wood, but it’s likely to remain among the best options for reducing the climate impact of constructing new buildings. Other common building materials like concrete and steel have big carbon footprints of their own, and have also seen sizable price increases in the last year. More trees are still planted in the U.S. than are harvested every year, and strong demand for lumber tends to support that trend, rather than obstruct it, says Tom Martin, CEO of the American Forest Foundation, which helps landowners conserve forested land, including through sustainable timbering. The uptake of mass timber also supports more sustainable forestry by making use of shorter and smaller-diameter trees and leaving the biggest, oldest ones in place, he says. That gives landowners an incentive to plant more trees and manage forests in ways that benefit the environment. 

Onion Flats, a Philadelphia-based architecture and development firm, canceled a planned 88-unit apartment complex in North Philadelphia in 2021 partly because of the surging cost of lumber.

Vaagen, who ran his family’s sawmill for 15 years before launching his own company focused on mass timber, says the material price surges of the past year, the likelihood of long-term increases, and the ever-growing urgency of the climate crisis may all encourage builders to adopt less carbon-intensive products. But those products, he says, are still going to be made of trees. 

"It doesn’t take long for reality to shift and a paradigm to be altered," Vaagen says. "I think we’re going to revalue wood."  

Cover image courtesy of the American Forest Foundation

Related Reading: How to Build an Affordable America

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