The High Cost of Lumber, Explained
If you have been to the lumberyard recently, you likely came away with sticker shock. Lumber prices are up dramatically— from 67% this year to 340% last year. And, of course, environmentalists and endangered species are getting blamed. (We have seen a marked rise in rude emails to EPIC, which is one of the casualties of this job.) To set the record straight, let’s be clear that it was market failures—not environmental protections—at fault for the jump in prices.
At the start of the pandemic, anticipating hard times ahead, timber companies sought to offload their back stock of milled lumber. With potentially turbulent times ahead and a projected recession, becoming liquid was perhaps prudent. At the same time, mills closed their doors or cut shifts, either because of COVID-related closures or because they wanted to keep costs down in an economically anxious period. This led to a supply problem that may not have even reached its zenith.
Instead of a slowdown, sales soared. Stimulus checks and postponed spending on vacations and travel—together with the ability of modern office workers to work from home—meant that some people in the economy had more money than before. Folks stuck at home got home improvement fever. Millennials too are finally primed to pursue home ownership, which has resulted in a hot housing market, putting pressure on lumber supply to meet the demand for new housing. So, with increasing demand and a weak supply, the conditions were primed for a price explosion.
At the moment, we don’t have a timber problem; we have a lumber problem. Drive past the log decks at local timber mills and you can see thousands of acres of forest, hacked down and laid horizontal, waiting to be milled. There’s plenty of wood to be milled and timber companies are doing their best to capitalize on the moment. Sawmills are ramping back up production. Wood futures markets—yes, that’s a thing—anticipate an eventual decline in prices but we may see exaggerated lumber pricing for quite some time. So perhaps don’t expect this bubble to burst; it will most likely deflate.
There is an environmental cost to this timber boom too. After a pretty blasé decade after the Great Recession, the timber industry appears to be roaring back. Small forest landowners who have foregone logging, waiting for prices to pick up, are looking to log. Same too for the big boys, the large industrial timberland owners. Timber harvest plans and other permitted logging is up; the limiting factor seemingly being the labor necessary to cut, deck, and deliver the trees to mills. Like all of the “rushes” before it, the frenzy to get-rich-quick risks environmental damage. The same deck that the homeowner wants is also the forest that the owl needs. If the societal cost of logging was factored into the price of timber, we would likely also see an increase in price. Alas.