What is behind this extraordinary situation, and how long will it last? It looks like US homeowners have found themselves in the middle of a perfect storm of factors: a pandemic-driven surge of demand, an ailing lumber industry, and climate change.
See: How to buy a house – a first-time buyer’s guide
Unprecedented demand
It is by now a fact of pandemic life that there are not enough homes going around, with demand far outstripping the available supply of homes. Barron’s (opens in new tab) reports that ‘builders have only been able to prevent overall inventory from collapsing by selling homes where construction hasn’t yet started.’ Family homes are up a huge 50 per cent in demand in comparison with pre-pandemic levels, but there physically aren’t enough homes to go around – and there is not enough lumber to build them. Robinson Meyer points out in an article (opens in new tab) in The Atlantic that there is a demographic component to the surge in demand for homes that’s putting extraordinary pressure on the lumber industry. Millennials are now of the age where they are ready and able to become homeowners, and neither the builders nor the lumber industry were prepared for the onslaught. ‘Just as we [millennials] stretched public-school systems in the 1990s and inflated the urban apartment market in the 2010s, we are now trying to buy more houses than exist to be sold,’ Meyer comments.
Trouble in Canada
This coming of property-owning age of Millennial buyers is happening at a time when the lumber industry is being ravaged by a very difficult combination of climate change effects. The knock-on effect is from Canada, which supplies the majority of timber that becomes the lumber that is used to build frames for US single-family homes. The changing weather patterns in British Columbia and Alberta are causing a resurgence of the mountain pine beetle that has already destroyed 27 million hectares of forest. But that’s not all. Canada is experiencing record-breaking forest fires, now burning more than one percent of its forests every year. As a response, Canada has had to curtail the amount of timber being exported, making what is available hugely more expensive.
Industry problems
Finally, the lumber industry in the US is not on top form – and the reasons stretch way back to the financial crisis of 2008. America’s lumber production slowed down dramatically after the credit crunch temporarily halted demand for new homes, and it has never fully recovered from it, producing 11 percent less lumber ever since. Couple this with sawmills closing during the pandemic, when the lumber industry was anticipating a major downturn, and the result is an industry that cannot meet the sudden surge in demand. The New York Times (opens in new tab) writes that this is a problem affecting multiple US industry sectors: ‘businesses are beginning to face the challenge of producing adequate supplies of goods and services – whether lumber or cold beer – to satiate that resurgent demand.’
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What should you do during the lumber shortage?
Stinson Dean, CEO of Deacon Lumber, told Fortune (opens in new tab) that lumber shortages will persist into at least November and that higher lumber prices are here to stay. It may be that prices come down again as the US negotiates overseas timber contracts to stabilize supply, but this solution isn’t a quick one. If you are buying lumber for a project at home, you may be better off sourcing reclaimed lumber, using pallets, or, if you’re building a deck, using composite or plastic decking boards.
