"A lot of contractors who didn't stay close to the market got themselves obligated to a project" with bids based on outdated lumber prices, said Denis Englander, a lumber buyer at Channel Lumber in Richmond, CA, which supplies builders of large projects such as airports, hotels and schools. He also wanted to set the record straight on another item: "It is primarily for force-protection purposes, not for any nation-building or Iraq reconstruction efforts." The trickle-down effect has just started to hit builders. "I wouldn't dispute that it could be an influencing factor, but we're not a big player in the market," he said, noting that timber is a multibillion-dollar business. But he scoffed at the notion that military buying had caused wood prices to spike. Jack Hooper, a spokesman for the Defense Logistics Agency in Fort Belvoir, VA, which handles military procurement, said it bought $50 million worth of wood, including 666,000 sheets of plywood, much of it to build bunkers, guard posts and tent flooring for troops in Iraq. Other factors include higher fuel costs for trucking lumber around the country and the moribund economy that caused some lumber mills to shut down in recent years.
Second, the long, tough winter in the East Coast, Midwest and even the South (which had heavy rains) shortened the building season so that in some areas, builders couldn't get started until May. consumption of softwood lumber goes into new homes and 30% into remodeling and repair.
Similarly, low interest rates have prompted legions of homeowners to refinance or take out home-equity loans and begin remodeling projects. That's the highest rate of housing production in 17 years, according to the National Association of Home Builders in Washington, D.C. Home builders broke ground for 1.87 million new units in July, the most recent month for which figures are available. Housing starts have been roaring along at record highs. "The demand is real it's there it's huge," Sherrill said. Why the skyscraping prices? There are many reasons, but the main one is straight out of Economics 101. "So it isn't all rosy" for the retailers. "People defer purchases when prices go up," Dunn said. Although the Seattle-based company can earn a higher percentage from wood sales when prices increase, not all customers will pay the extra costs, he said. Lumber prices are up because of typical seasonal demand, and costs for plywood and related items have skyrocketed about 2 1/2 times, Dunn said. Lumber used for framing rose at rates from 46% to 65%. OSB, or oriented strand board (a composite panel similar to plywood) is up a whopping 152%, from $170 a year ago to $428 currently. Its wholesale cost rose from $268 per 1,000 square feet to $510, according to Sherrill. Sheets of material used for roofing, siding, and different types of wood flooring experienced the biggest price increases. "We are at historical highs," said Sam Sherrill, executive editor at Crow Publications, a Portland publication that tracks prices in wood products. A ten foot two-by-four now can cost as much as $5.50, up from about $3.99 a few weeks ago. Do-it-yourselfers who walk into some building-supply stores this week will face paying more than $22 a sheet for 4-foot-by- 8-foot, half-inch-thick CDX plywood that until recently was $14 a sheet. "The panel market increases are by far the largest I've seen in my lifetime," said Mike Dunn, an owner of Dunn Lumber in Seattle, who has worked in the industry for more than two decades. Given that wood accounts for a third of the cost of materials for new homes, the stratospheric increases soon will start to hit homeowners. Wholesale costs of lumber have soared in the past few weeks, driven by the continuing boom in new-home construction, the harsh winter that shortened this year's building season and the military's need for wood for U.S. Ditto the price of siding and framing materials, according to the Seattle Post-Intelligencer. 9-The price of a roof is going through the roof.