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The Ambiguous Cost of Lumber

CFE Views 9.2: The Ambiguous Cost of Lumber

Unveiling the True Expenses of Construction.

While the U.S. imports around 80 percent of softwoods from Canada, we did not see what would seem like an obvious price hike in lumber. Actually, we saw the opposite. Which may leave you scratching your head on the principles of supply and demand. Lumber prices dropped, in fact, they fell by 10 percent in 2023.

“Events like wildfires usually don’t have as much of an impact on our lumber sources as you might think,” states Dave Helms, CFE VP of Lumber. “Lumber prices have mostly to do with supply and demand. When prices soared during the pandemic, it was from the complete breakdown in the supply chain, which every industry experienced. It unfortunately happened during a time when construction had a lot of momentum. And that’s why prices went so high—everyone wanted and needed lumber but were having a hard time getting it. Right now, lumber prices are actually very favorable.”

What’s not so favorable, as Dave shares, are high interest rates, which are bringing construction to a halt in some parts of the country. Dave explains lower lumber prices now compared to a couple of years ago are outcomes of high interest rates slowing down new construction and the demand for lumber.

If natural disasters aren’t affecting lumber prices and thus construction costs, what does impact the price of new construction? As Dave explains, “Lumber is a raw material, and therefore a traded commodity. The price is going to fluctuate with supply and demand. It’s the building materials like roofing, metal siding, windows and doors—once those prices go up, they stay up.”

In the past four years, many of those building materials, like siding, have risen anywhere from 20 to 40 percent, and most will not go back down. While inflation seems to have put a damper on the construction industry as a whole, Dave shares that CFE Lumber hasn’t been hurt.

“We are fortunate to be in an area where building is still strong. Our partnerships with construction cooperatives allow us to mitigate fluctuating prices and ensure our customers get the best prices possible.” Dave continues, “However, we are looking forward to seeing lower interest rates to open things up a bit more. They say six percent interest is the magic number, so fingers crossed that happens soon.”
 

The Not-So-Obvious Costs

According to Forbes, on average, it costs $214,040 to build a home in Iowa. This figure can rise up to over $360,000 if you include land costs, excavations, permits and other expenses. The National Association of Home Builders estimates the actual cost of construction is around 75 to 80 percent of the total cost of a home build. As you plan your budget for a new build, don’t forget to include the following, as they can put a large dent in your investment:

  • Land Purchase – If you already own the land, you’ll be saving yourself a big expense that can be a large cost in a project.
  • Construction Site – Is it a ready-to-build site or does the land still need clearing? Do utilities such as water, sewer and electric need to be installed? Does the location have easy access to supplies and resources? Will there be traveling costs to bring the appropriate workforce to the site? These are all factors to consider.
  • Site Work – These are the fees associated with building permits, inspection fees and any engineering plans, which can quickly add up to thousands of dollars.
  • Project Schedule – Adding time to the duration of a project will add costs. With this in mind, a strong project manager can make all the difference in keeping your build on schedule and within budget.
  • Quality of Plans & Specs – Poorly drawn plans or vague wording can inevitably cause confusion and mistakes, generating more costs.
  • Final Steps – Don’t forget about that curb appeal! Landscaping, driveways and outdoor structures such as porches and patios enhance the home.
  • Contingency – It is advisable to include at least a 10% contingency towards unforeseen costs in your building budget.

All these costs may seem overwhelming and daunting, but CFE is here for you. We work with many credible contractors that you can rely on. From drafting to estimating your costs and supplying materials, you can rely on CFE to help build your dream, within your budget.
 

Have You Heard? You Need to See!

If you haven’t swung through the cities of Hartley, George or Ocheyedan lately, it’s time for a road trip! Both CFE Lumber stores have recently undergone makeovers. Not only have they renewed their displays and product options, but they have also added a new product line: Milwaukee Tool, a leading manufacturer of heavy-duty power tools and outdoor equipment. Come see our refreshed lumber stores today! <<

 


 

SOURCES:
  1. Canadian wildfires raised air pollution. Lumber prices could be next. ConstructionDive, 2023constructiondive.com/news/canadian-wildfires-air-pollution-lumber-prices-climate-risk
  2. How Much Does It Cost to Build a House? Family Handyman, 2024familyhandyman.com/article/how-much-does-it-cost-to-build-a-house/
  3. Factors Affecting Building Costs. John Manciameli, 2020. linkedin.com/pulse/factors-affecting-building-costs-john-manciameli/

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