The Lumber Shortage Explained
"The price of lumber is making headlines as the highest it's ever been. The source of the crisis can be traced back decades through a supply chain that's struggling to keep up."
The number one question I get asked these days is, “Why are lumber prices so high?”
Lumber prices have soared in the past year, making headlines across the country. From March of 2020 to mid-May of 2021, lumber prices increased by as much as 377 percent, increasing the cost of building a new, entry-level Seattle home by $30,000.
The simple answer to the increase is high demand and a strained supply chain—but the truth is, the crisis we’re seeing today is complex and can be traced back decades.
As your local lumber store for over 90 years, we’re here to help you understand the full story. Here’s a brief description of how the lumber supply chain has been strained over the years.
Decades of decline in timber supply
The skyrocketing cost of lumber today can be traced back all the way to 1990, when the U.S. Fish and Wildlife Services declared the spotted owl as endangered, closing off logging in much of the Pacific Northwest. The result was an 80 percent reduction in harvest which led to many mills closing and the loss of both highly skilled jobs and also the knowledge base that went with them.
Nine years later, a major outbreak of mountain pine beetles, who lay their eggs under tree bark, ravaged the forests of British Columbia (which exported over half its timber supply to the U.S. at the time), killing over 44 million acres of timber. Over the decade following the beetle epidemic, British Columbia’s loggers clear-cut anything that was salvageable. The lumber industry was busy for a period—but once the dead trees had been harvested, things slowed down. With a waiting period of 60 to 100 years until the next harvest, logging companies cut jobs.
The logging industry has been even further ravaged by the catastrophic wildfires of the last decade. Beginning in 2011, fires along the West Coast have devastated harvestable forests year over year. From 2016 to 2020, wildfires burned over 30 million acres of forest in western states, 75 percent of which were federal land.
Over time, all these factors have led to a marked decline in the availability of timber and skilled loggers to harvest what’s left.
Struggling sawmills
With so many impacts on timber supply over the decades, there simply hasn’t been enough capacity to keep sawmills alive. Many mills have been forced to consolidate or close entirely over the years due to the shortage of supply and the decrease in demand caused by the last recession.
When the economy took a turn in 2007, housing starts fell to record lows, and wood product prices dropped dramatically. From 2005 to 2009, mill capacity fell from 80 percent to 50 percent, forcing major mills in the Pacific Northwest to shut down operations entirely, cutting over 70,000 jobs in the process. And despite the increase in demand we see today, it’s not as easy as one might think to open new mills. Sawmill machinery is very costly, and there are only a few mill manufacturers in the industry.
Too few trucks to go around
Over the past decade, the trucking industry has struggled to fill seats, which means shipping delays and product shortages have increased across the country. Trucking companies have tried to attract job seekers by offering higher pay, which has a significant impact on supplier costs. And to pay for those increases, suppliers and retailers have been forced to raise prices for consumers.
COVID-19 and the remodeling boom
The most tangible effect on lumber costs has been the coronavirus pandemic. Logging companies and what is left of operational sawmills were forced to shut down operations for weeks, bringing lumber production to a complete halt. When businesses were allowed to reopen, COVID-19 outbreaks at mills forced intermittent closures throughout 2020.
At the same time, demand for lumber soared in a perfect storm of competitive needs. Housing rebounded due to low interest rates and a nationwide shortage. Remodeling and outdoor projects grew rapidly as people wanted to improve their stay-at-home experience and also be outside whenever possible. Plywood and OSB were in huge demand as cities tried to prepare for rioting and violence. And, businesses built all manner of COVID-related barriers and provisions.
What does the future hold for lumber prices?
What we’re left with is a lot of people wanting lumber, and a supply chain that hasn’t been able to catch up. The high price tag of lumber and plywood is just one domino in a complex chain of events that will eventually stabilize with supply better matching demand.
Our advice? If you can afford to put your projects on hold, prices will fall eventually, but it will take some time. If you need to build now and are prepared to pay a higher price, know that we’re working hard to maintain your trust through these difficulties, and that means giving you the best value we can.
Want more transparency about what’s going on with lumber? Contact me directly: MikeDunn@DunnLumber.com.
