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Coming out of the Pandemic, the Sky-Rocketing Price of Construction Materials

Posted by cmarquez on May 14, 2021
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As the Pandemic settles down across the U.S., a ripple effect of sky-rocketing construction materials is throwing contractors, developers, and housing residents for a loop in completing and beginning projects. While construction projects are being planned, last year’s shutdown of mills, refineries, and factories due to the pandemic has caused a backup in materials to the U.S., causing the cost of materials to increase rapidly and also be delayed in their production. Lumber prices have increased an estimated 300% since late April 2020. Cost hikes and disruptions in the region’s lumber supply chain are now shuddering across retailers, wholesalers, and builders in Utah’s construction sector, which has been a bright spot in retaining and expanding jobs during the pandemic. (SL Tribune) For example, a sheet of 4 x 8’ ½ inch plywood was $8 dollars two years ago and is now $56 a sheet.

Constructions companies across the mountain west are including verbiage in their contracts to negate the risk of material escalation. With lumber, light gauge steel, and other materials escalating it is has created a need for construction companies to protect themselves and owner sides.

“Subcontractors are holding prices for only seven days and in some cases just 24 hours. That means from the time the bid is submitted to the contracted date, there could be an escalation of material that was not accounted for. If we bid with assumptions in escalation, we will price ourselves out of the job, but if we bid straight up and must change the order for the escalation we look like the bad guy. That makes things tough for a good balance in customer service and delivery,” said Brenden Graves, Vice President of Project Development at Kalb Industries of Nevada.

According to the Salt Lake Tribune’s recent article on lumber and housing costs, mills across the Pacific Northwest and Canada that normally feed lumber into Utah shut down with the pandemic’s initial U.S. arrival. Some anticipated demand would slow, along with other commodities, as the crisis took hold.

But the opposite happened, especially as sectors like home improvements and furnishings took off. Utah and other states crafted their first health edicts to make construction and real estate workers essential and lockdown-exempt. Regional suppliers never really caught up, their customers say.
And even as U.S. vaccination rates climb, there are worries that some overseas timber suppliers might continue to be slowed by COVID-19 outbreaks and resulting lockdowns. (Tony Semerad, SL Tribune)

The bottom line is that the surge in lumber prices that occurred between April 2020 and April 2021 has added $35,872 to the price of an average new single-family home and $12,966 to the market value of an average new multifamily home. (National Association of Home Builders)

Mountain West Commercial’s network of contractors say they have never seen the prices this steep but stated that even when prices increase in the past, they have always dropped back down.

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