Perhaps the smartest commodity investment people could have made over the past year and half would have been lumber.
Gold prices at the end of the day Tuesday were at $1,899.80 an ounce, up $22.46 from the $1,877.34 they hit on Jan. 1, 2020 – a 1.2% increase.
Alpine Lumber Manager Lou Ulrich reported the price of half-inch oriented strand board, used in exterior walls, roofing and flooring, was at $59 a sheet last week, up from $11 per sheet on Jan. 1, 2020 – a 436% increase.
“Lumber panels are difficult to get, and if you find them, prices are at all-time highs,” Ulrich said. “But we haven’t seen a decrease in demand here even if costs have increased.”
That demand for lumber hasn’t gone down in Durango, despite more than a four-fold increase in price, is testament to the strength of the housing market and the number of remodels going on in La Plata County.
Ulrich believes the only thing that might drive the price of lumber down anytime soon would be a spike in interest rates, which would make new builds and remodels less attractive.
Even a good spike in interest rates might not be enough to cool hot lumber prices in Durango if homebuyers are coming from real-estate markets where housing prices are even higher than in La Plata County.
“If you’re moving from California, you’re still finding cheaper housing here, and the increased price in lumber doesn’t faze them,” Ulrich said.
Lumber prices across the country have strengthened like a Category 5 hurricane since the advent of COVID-19, which has sparked a mass migration from bigger cities to desirable smaller towns, and Durango might be landfall for the storm.
Jake Walsh, owner of JT Builders, said he’s booked solid to build homes and complete remodels through spring 2023.
“ It's difficult to set cost expectations today for a home we will break ground on in 2022,” he said.
“Right now, we’re averaging $350 per square foot to build, but the way prices are rising, there may be a day when our client says, ‘No, I can’t do that.’ But so far I haven’t heard that.”
Lumber isn’t the only cost of building that’s going up. The price for copper, conduit and labor are increasing as well, Walsh said.
Despite the price increase, if anything, Walsh said demand for his services is only picking up.
Like Ulrich, Walsh suspects the prime factor that might bring lumber prices and building prices down and cool the red-hot market would be a hefty spike in interest rates.
With interest rates remaining relatively low at just above 3%, enough people can amortize the increased cost of construction into a 30-year mortgage to keep builders busy for the foreseeable future, he said.
“It’s just crazy right now,” he said. “I went from getting a call every once in a while, to getting two or three website submissions a month from potential clients.”
One concern that has emerged is theft of lumber from job sites.
“We're having to consider surveillance and security on the job site these days,” he said. “We never really worried about that in the past, but with lumber and other building materials being such precious commodities, we need to take job site security into account. We like the phone calls coming in and we like the signed contracts, but it comes with some challenges.”
Rebekah DeLaMare, executive officer of the Home Builders Association of Southwest Colorado, said lumber supply nationwide has never caught up from the impact of the COVID-19 pandemic.
Many people assumed demand for building would crash like much of the rest of the economy with the arrival of the viral pandemic.
Instead, the opposite occurred.
With more people staying home, more homeowners began to work on do-it-yourself projects – building new decks, remodeling kitchens, making additions.
In addition, social distancing, quarantines of workers and other precautions at lumber mills shrank the availability of lumber.
The initial effects of the pandemic were followed by increased demand for new builds with the migration from cities to rural locales and small towns.
“It’s like the toilet paper rush, right? Everybody needed it, everybody wanted it,” DeLaMare said. “We saw a huge increase, a huge demand, and the production could not meet that demand.”
On April 28, the National Association of Home Builders announced the national average price increase for a 2,000-square-foot home in the past 12 months was $35,872.
Especially in La Plata County, DeLaMare said the dynamics have all combined to make development of attainable housing even more problematic.
Between rapidly rising material costs and delays and shortages of getting material, costs are rising at a pace that makes it hard for the financing of attainable housing projects to pencil out, DeLaMare said.
“It’s making the risk between attainable and affordable housing projects even bigger, less manageable,” she said. “So now you just have this perfect storm culminating with the right – or if you will, the wrong – circumstances to create an absolute unattainable price and supply chain.”
parmijo@durangoherald.com
