As the East Coast prepares for Hurricane Florence to make landfall late Thursday or early Friday, the construction industry is already seeing the storm's costly effects through lumber prices. According to Prosales magazine, the impending hurricane and any that follow are expected to bring a 10% lumber price hike that may last roughly two months.
On Sept. 11, Prosales reported this prediction after talking with lumber buyers in the construction industry, one of whom based the 10% hike on recent cost increases for Southern yellow pine. High lumber prices mean there's a low supply because hurricanes not only close lumber mills, but also impact employees who focus their attention on repairing and/or rebuilding their own homes.
"Lumber prices look to be heading higher and are still sitting at levels that have hardly ever been reached before (with the exception of earlier this year)," Forest Economic Advisors-Canada Managing Director Russ Taylor wrote in his Wood Markets report last month. "As we've indicated for some years now, the North American lumber supply chain remains fragile, and any disruptions will only cause more price volatility."
Despite increased costs of lumber, Associated Builders and Contractors, Inc. (ABC) reported Sept. 12 that construction material prices actually dipped about half a percent in August from the previous month. However, year-over-year (YOY), prices were much higher, coming in at just over 8%. Softwood lumber prices were among those materials to decrease—9.6% month-over-month—but were about 5% higher YOY.
ABC, in conjunction with Bureau of Labor Statistics data, said a likely reason behind the softwood lumber price drop is "a weakening single-family residential construction market" brought on by labor shortages, high land prices and high mortgage rates.
"In the final analysis, the falling input prices trend likely won't continue," ABC Chief Economist Anirban Basu said in a statement. "Inflation expectations have shifted, with purchasers of construction services now anticipating price increases and, therefore, more willing to accommodate them."—Andrew Michaels, editorial associate