We checked in with Brian Tucker, our project estimator on the current status of building material costs.
Congratulations on your new role, Brian. Can you tell us more about your position as the project estimator?
Day-to-day I help our design team move our design packages from the rough budgeting stage to a fully priced contract. When I’m not doing that I help our production and design team research and develop new specifications to keep up with an ever evolving industry.
During the pandemic the price of lumber skyrocketed, what's the situation now?
Lumber is a national commodity and supply is fairly uniform and not elastic to demand because it takes 30 - 40 years for a seed to become a truckload of 2x4's. Price is almost entirely driven by the demand for new housing units at a national level and other economic forces like benchmark interest rates and institutional risk tolerance. While the pandemic did cause some temporary supply interruptions, the bulk of the price increase was due to a rise in demand for new construction. Because sawmills are not able to suddenly increase output and our national labor force can’t grow overnight, the increased demand for new construction drove up the price of lumber at least 200% just about everywhere. As real estate prices have leveled off since 2021 and interest rates continue to rise, the demand for new construction has dropped dramatically and so has the commodity price of lumber. Current lumber futures prices are right in line with where they were before the pandemic, or in some cases lower where regional distributors are selling off excess volume.
What about the cost of building materials in general?
Unlike lumber, many material inputs saw significant supply interruptions in the last 3 years and are recovering slowly. Appliances and many other interior fixture products with complex supply chains have longer lead times and higher prices than they once did. Another big cost driver is labor. Over the last decade the US has seen the demand for labor rapidly outpace the labor supply as economic growth rises as fast as ever, population growth is in decline, and more and more job growth occurs in the fields of technological and financial services rather than industries like construction and manufacturing. As a result, the price of any service that requires human-labor inputs has far outpaced the rate of inflation.
