Building Material Price Guide 2021 – Lumber Prices – Rising Prices As we progress through extraordinary times, contractors are getting complaints from their clients about the overall increased prices of construction projects. In similar, NAHB has...
Building Material Price Guide 2021 – Lumber Prices – Rising Prices
As we progress through extraordinary times, contractors are getting complaints from their clients about the overall increased prices of construction projects. In similar, NAHB has recorded a price spike for a new single-family home by as much as $24,386 since April 17, 2020. That makes 180% in comparison to what homeowners were paying since last spring.
Experts are foreseeing the prices to stay high for almost all construction materials and products, like lumber, iron, steel, Gypsum, and ready-mix concrete. But what has caused such a massive surge?
There are a host of factors and reasons to blame, but in a broader perspective, the same basic cause is related to the gap between supply and demand. But to be specific, it’s that combo-effect of stimulus inflation, increased demand, and supply chain issues due to COVID-19. The production mills and factories are facing lockdowns or slow production amid the pandemic.
But at the same time, people are made to stay home with mandated work from home policies. With such, more homeowners are looking to take the plunge of home improvement and renovation projects. Moreover, they are not spending money traveling and touring; now, they are spending the same on home renovation projects. There is as much as a 30% rise in the number of projects year over year. That is one part of the issue on the demand side.
Contractors are now starting to look for ways to neutralize the impact by managing overheads and reducing the overall cost of construction projects. They are starting to pinpoint the mistakes related to direct and indirect costs contributing to the price spike.
So, here’s our guide on the soaring prices of construction and building materials and how a contracting firm can tackle to reduce the impact on their business and avoid cost overruns. The surge in Construction Material prices.
Lumber Price Increase
Owing to the plethora of benefits of lumber products, we see its applications across the construction of the entire home. They are used not only for framing but also for insulating and finishing. Such an extensive use means to have a greater impact on the overall cost during a price spike. The same has happened amid pandemics.
Here’s how we now know lumber by the number. Lumber prices have soared in recent months and are going through the roof across the States. Business Insider has reported a price spike in lumber by more than 250% compared to the cost of last year. While comparing the latest prices by the Random Lengths of lumber, it is noted as $975 per thousand board feet, which is 180% of $350 per thousand board feet noted in April last year. These averages by NAHB are based on softwood lumber used in structural framing, sheathing, flooring, and underlayment. Their prices have spiked to about 112% higher than the price of the previous year.
NAHB has attributed the escalating lumber prices to insufficient domestic production while lumber mills call for prompt action to address supply shortages. Such issues have harmed not only small businesses and homeowners but also the overall economy. The findings of home Depot are also no different. They have recorded the prices increase for all lumber products based on various factors.
Now apart from the reasons just explained above, there’re some other reasons too. With interest rates stumbling low, there’s a surge in demand for new housing, giving builders reason to increase production. Lumber is also more in demand due to increased delivery of durable goods shipped on wooden pallets.
For the supply part, there’re reasons too. Suppliers and mill operators were expecting the demand to stay low, following the same trend in 2019. But then the COVID breaks in, and they’re left with an unexpected boom with housing as one of the brightest spots in economic recovery. In the aftermath of COVID and in an attempt to comply with the social distancing rules, mill operators find it hard to manage supplies.
Iron and Steel Prices
The case of iron and steel is no different than lumber. The rebar you use in concrete pours has spiked by 20% at just the start of this year. That can make your concrete pours as much as $200,000 – costlier than ever before. Such a price gain has a rippling effect skyrocketing the costs of drywall, copper, steel studs, and even vinyl siding. Now steel is in hardware and a lot of products, so they all follow the same trend.
According to the Producer price index, iron and steel scrap has seen a rise in the cost of 50.6% over 12 months. Associated Builders and contractors have reported a rising trend in prices for fabricated structural metal products, iron, steel, and steel mill products.
Gypsum based products
Homeowners prefer Gypsum in interiors as plasterboards as partitions and the lining of walls, ceiling, roofs, and floor. But with the surge in demand for drywall and insulation, the prices of Gypsum-based products have risen by as much as 1.5% in the first quarter of this year. Compared with the cost pattern of the past 12 months, the producer price index (PPI) for gypsum products has increased 6.3 percent.
Steel mill products
The price of steel mill products is also a major concern for contractors and merchants dealing with blooms, ingots, slabs, and sheets. The prices of steel mill products have climbed by as much as 22%. A concerning aspect of such a spike is the rapid pace of the increase over the past seven months.
The prices for ready mix concrete were volatile in the latter half of 2020. But experts are seeing an increase in prices by as much as 0.3 percent in February this year. Anyhow, the prices have decreased in the South and Midwest parts of the company. But the case is different for the Northeast and west, where the PPI has increased by 1.4%.
Know your Challenges
With construction materials getting pricier, homebuilders are facing problems finding materials at a reasonable price. It is challenging for contractors to cope with the sky-high buyer demand despite the rising home prices and climbing mortgage rates.
With a shortage of materials, equipment or parts, COVID-19 has caused delays in construction projects apart from the supply chain disruption. The manufacturing and distribution of building materials have seen a major setback due to lockdowns and the shutting of production units. That, in turn, has increased the rates of the construction materials, and contractors are finding it hard to follow their construction schedules.
Surviving the challenges and your way out to stay strong
Now that you’re through with the surge in numbers of all material prices, it’s time to make a move and shift gears to cope with the situation. You know the challenges, and this will help you in making a workable plan against all odds.
The equation is simple yet challenging. It would help if you managed your direct and indirect costs to stay profitable and avoid cutback to profit margins. Here’s what we believe will be a definite help for you as a contractor:
- Try to compare the material prices of different shops to secure savings and shop at once for all components instead of sending your workers to the nearest retail hardware store. You can compare the prices of online stores and can find stores offering wholesale rates. Buying in bulk will further help you in getting discounts. Though these discounts might look small, these small cost savings will be big savings for a large project.
- Manage your site properly to reduce wasted time and project delays. You can make teams and delegate tasks to enhance efficiency at the site. Try to hire competent and trusted project managers to help you creating project goals and meeting deadlines.
- Your team is an asset, so try to engage the right workers that stay with you, even during hard times. Follow a workable hiring plan for labor and subcontractors. Check for their license and their past work.
- Avoid cost planning errors in estimates. Try to hire a construction takeoff and estimating company that would help you allocate the proper budget for all the tasks and reduce your expenses in the long run.
- Use quality tools and equipment to expedite progress. Know the scope of work and evaluate your project requirements before hiring equipment or buying tools.
- Try to promote good construction practices and avoid construction waste. That will help you in saving money and improve the site efficiency.
You can use the above simple steps to reduce construction costs. Lowering the amount you spend on building materials, reducing labor costs, and cutting down your running expenditure would ultimately help to improve your bottom line, and that will make your business more profitable.
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