The Lumber Conundrum
The Lumber Conundrum Vlog Transcript
Hi everyone, Tom Bickimer here.
As much as I don’t want to be the bearer of bad news, I think it’s time to talk about something I haven’t seen in my forty years in the homebuilding business.
Lumber prices have risen so high and so fast they are threatening the health of the housing market and the operations of homebuilding companies like Bickimer Homes.
Let me explain: Homebuilders typically make price adjustments from time to time based on cost increases they receive from their suppliers and subcontractors. Lumber is the largest contributor to the cost of constructing a new home. Normally, lumber prices moderately fluctuate depending on weather events or natural disasters, the cyclical demand for housing and the general state of our economy.
The pandemic turned business as usual into crisis management. Last spring lumber mills in the U.S. and Canada significantly reduced their work force and production. They have struggled to ramp back up ever since. In the meantime, mortgage rates fell to historic lows which ignited a buying frenzy. Homebuilding companies were writing contracts to build homes for buyers at an unprecedented rate. Ordinarily that would be a good thing for builders. Instead, lumber prices have increased so rapidly they threaten to decimate the builders’ profitability while imperiling the buyers’ ability to afford those homes.
Every industry has its challenges, but there aren’t many that have the social and economic impact that homebuilding does. Throw in the repercussions of a pandemic and I can tell you this is not a drill. This is for real. Families are being priced out of the new and resale housing markets, property taxes are skyrocketing and, yes, homebuilders, many of us family-owned businesses, are dealing with financial and operational challenges never before encountered.
I’ve been around long enough to know that something has got to give. There are no easy answers, but there is a reason Bickimer Homes has been in business since 1982. We have the skill and the experience to manage our way out of this current crisis while serving our customers to the best of our ability.