You’ve probably seen it posted across your social media or on the local news: Building material prices are up and reached unprecedented highs in May 2021. If you’re thinking about starting a remodeling project, you might wonder what lumber and other construction material prices could do to your dream renovation, much less your budget.
This blog post will provide more context as to why lumber prices shot up in the first half of 2021, how it might affect your remodel, and what you can do to move forward with your remodeling plans during price uncertainty.
What’s Happened to Lumber Prices?
In June, the Associated Builders and Contractors estimated that the cost of softwood lumber–most commonly Southern yellow pine, popular in construction–rose 154% in a year, and specifically 20% from April to May 2021. At the peak, softwood lumber went for a shocking $1,600 per 1,000 board feet, up from an average of $400 per 1,000 board feet in 2019.
Experts differ on the reasons for the jump in prices. Most argue that a temporary imbalance in supply made the demand for new building supplies more prominent, a situation that got worse as the worldwide slowdowns in production continued through the pandemic. Others suggest that increases in demand in late 2020, due to pandemic-related priorities shifting toward the home, drove prices continually upward. In any case, a springtime ramp-up in production is leading to a significant drop in prices, now below $700 per 1,000 board feet and dropping quickly.
How Do Material Prices Affect My Project?
The price of any material, like lumber, affects the cost of projects in different ways:
Kitchen Remodel: If you’re going for a major overhaul, perhaps with a bump-out and custom cabinetry, you’ll pay more than if you’re keeping a similar design.
Bathroom Remodel: Unless you’re framing a new bathroom in a basement or adding onto your home, you may not notice a big price increase for a bathroom.
Home Additions: Since framing is the biggest factor for lumber prices related to construction, you’ll see the biggest increase here.
Should I Schedule My Remodel Based on Lumber Prices?
If you read the news and consider yourself an educated consumer, it’s easy to conclude that you should only buy while the prices are low. In practice, that can lead to never starting a project at all. It’s a much better idea to select a time that works for you and make sure you hire a contractor that you trust, whose pricing is transparent and easy to understand.
As mentioned earlier, lumber prices are already come back down to pre-pandemic levels. We can't predict the future, but it appears now that supply is catching up to demand for lumber and other building materials, making remodeling and building new much more affordable than two months ago.
Tips for Remodeling During Price Uncertainty
Make Sure You Understand the Estimate
Your best protection against unexpected price increases during your project is to understand the estimate and everything that’s included. For virtually any project, you can expect to see many line items that indicate the expected price of a particular material, as well as labor costs.
If you see a handful of broad numbers that don’t include the various parts of a specific task, it’s wise to ask for clarification. Some contractors don’t want to do the work of estimating, which leaves you guessing as to what your project will really cost. Others will deliberately estimate low or estimate based on the cheapest finishes, with the expectation that you’ll renegotiate with them in the middle of the project. Make sure that your contractor includes every detail you want on the estimate, with allowances for high-end upgrades if that's your desire.
Ask About Fixed-Price Contracts
To avoid the entire discussion of lumber prices, ask your contractor about a fixed-price contract. This is a concept that is easiest for property owners to understand. The price you pay is the price you agreed to pay on the estimate. That way, if prices go up during the project, you’re not on the hook to find the funds for them.
If your contractor doesn’t offer a fixed-price contract, ask about their price model. Many contractors use cost-plus, which means that they add a markup to the cost of materials at the time of purchase. This approach creates a lot of variability, however, and there’s a good chance you’ll be paying a different amount than you expected.
Be Wary of Unusually Low Estimates
There’s a reason that reliable contractors tell you not to base your choice on cost alone. The lowest bid may offer lower quality, but it might also be complete fiction. Sometimes contractors rely on allowances that aren’t enough for the project so that they can get unsuspecting homeowners to agree. Then, once the project is under way, they’ll ask for more money to finish it.
Hire a Contractor You Can Trust
Ultimately, you will have a better experience with a contractor who engages with you honestly and understands your needs and expectations. Experts know how to find the best prices without compromising on quality, and they’ll be honest with you about limitations.
Thinking About Remodeling This Year?
If you’re thinking about renovating your home to better suit your life, we’re here to help you get started. Contact us to schedule a consultation.