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Originally Posted On: 2021 Cost to Build a House a builders Perspective on Rising Material Costs (timberhaus.ca)

 

A Builders Perspective on Rising Material Costs

It’s something that’s now in our ordinary day-to-day lives; we all know that the price of building materials are on the rise. The cost to build a house in 2021 is rising. The high demand for materials in the United States, COVID-19 challenges, low-interest rates, and shipping costs increasingly add pressures to any construction, especially new homes in Canada.

Don Tolsma, the President of Timber Haus and Canadian Home Builders Association Board Member, was asked about the current rise in building materials costs,

“The Covid pandemic has seen its ups and downs concerning its effect on the construction industries. We’re facing a challenge; how to begin to price a new home and, secondly, get material. Lumber prices have increased 150% since July 2020. As a result, builders like Timber Haus have raised home prices. As cost pressures continue, we must raise our prices further.

In 2021 due to multiple factors, metal, latex, pipe, and many other items continue to rise. Shipping from overseas has tripled in the last year, resulting in cost increases in materials such as tile, stone, and any product coming from China. Finding items like Bathtubs are currently non-existent.”

Why are Lumber Prices so High in Canada

Over the last year, Lumber has been steadily increasing in price. Demand has increased dramatically due to the COVID-19 pandemic.  People are spending more time at their homes and improving them or building new ones which require massive amounts of materials.

In addition to this increased demand, investors trade lumber as a commodity; you can purchase lumber futures that usually control the overall cost you’d see if you’re in Home Depot. With increased trade in futures comes increased prices across the board.

Since 2020, lumber prices have tripled. There is no indication that prices will decrease in the short term. With low interest rates continuing on the horizon, the chance of prices maintaining their current elevated levels (or potentially increasing) is high.

4 Factors Driving Increased Material Costs

1. When COVID-19 began and the lockdowns were in full effect, many people started finishing home renovation projects they’d been putting off. Building decks, fences, finishing basements, or any other timber-related projects factor into the demand.
2. Many lumber mills shut down temporarily due to COVID-19 restrictions, which created a lumber supply shortage. Lumber mills are scrambling to meet increased demand but can not keep up.
3. Central banks lowered interest rates to spur economic activity, creating demand for new homes.
4. Border restrictions have delayed international material movement and made trade more complex from a cost and time perspective. Lumber sitting in warehouses and docks negatively impacts prices, timelines and supply.

The United States often takes precedence for suppliers because it is the biggest economy in the world with an insatiable demand for products. Our comparatively smaller market in Canada competes with them for everything we need to build a home which can cause shortages, increased costs and delays.

Why are building materials so expensive in 2021?

Is there a building material shortage for homebuilders?

Lumber is an internationally traded commodity. It starts as raw material, and then manufacturers process it into materials such as 2×4’s, plywood, and OSB. When lumber futures increase, everything goes up incrementally. We’ve been in the home building industry for a long time, and the price swings we’re seeing are something we’ve never experienced.

Lumber is the most prominent material that you’ll see make the news, but metals are becoming harder to secure. Items like garage doors, furnaces, ducting, wiring, and more have seen price increases. We’ve been getting letters from our trade partners with price increases due to this, and it’s forcing more upwards cost pressures.

As we start to come out of the COVID-19 pandemic, the economic effects will still be felt and are still in play. Borders have shut down, but international trade continues with stringent measures in place. Many ports have refused container ships from certain Countries, and many have processes in place to protect from COVID-19 that can slow down overall shipping times.

Other parts of your home, like drywall, are facing cost pressures.

Manufactured goods from China are experiencing delays due to ports keeping ships waiting outside several west coast ports and global delays due to the Ever Given blocking the Suez Canal delaying all shipping globally.

It will take months, if not longer, for the global shipping trade to recover, which we will feel due to decreased capacity and increased pricing.

Shipping delays put the prices of fixtures, appliances, material goods, tubs, faucets, and so on at-risk and cause suppliers difficulty keeping their inventory levels up.

We believe that new homes should be built with energy efficiency in mind, requiring a strategic approach in how we finish your home. We work closely with our trusted trades to ensure timely and priced correctly building materials is essential.

Timber Haus will continue to monitor materials supply and delivery closely to ensure we continue to build our homes on time, on schedule.

How has Timber Haus adapted to increased building costs?

We’re in a time that no home builder has experienced. Usually, there are small price increases that we receive from our suppliers during the year, but they’re small enough not to make significant changes. Many of our suppliers are increasing their prices across the board with no end in sight. We are working with them to get acceptable pricing to ensure your home doesn’t increase in cost substantially.

Timber Haus strongly advises our clients to build with us to do so sooner than later to avoid increased building costs.

We have already seen our lumber prices increase from two to three times from what they were this time last year, and we are planning that trend will continue for the foreseeable future. Since we have the expertise to build your home, navigating these challenges is a task we’re ready and prepared to take on.

We are doing our best to get our lumber prices secured early on in the home building process. We don’t place orders for your lumber until we have finalized the home design since we need to know more details about what we’re building for you.

What do increased material costs mean for Timber Haus?

There is good news that balances some of the increased cost to build a house in 2021. Central banks will continue to alter interest rates to speed up or slow down the economy. Interest rates not balanced correctly could lead to an inflationary environment which the Bank of Canada actively tries to avoid. It is a delicate dance, but the central banks keep a close eye.

For you, buying a home today offers the lowest interest rates in history. Even with the price increases, we’re facing; there are still massive savings on the cost of borrowing money due to low interest rates.

We can’t predict the future, but we see two significant indicators that won’t change within the next six to 12 months.

1. Interest rates will continue to be low. The banks are starting to raise them, but they’re still significantly lower than early 2020.
2. Material prices will continue to rise, as there’s no end in sight for the demand in Canada and the United States. As more people migrate to different regions in the States and work from home permanently, change in living is happening. People’s continued and increased focus on their homes will drive Real Estate in many areas and affect the pricing of new homes in Edmonton.

Right now, we’re seeing many people move forward with their decision to get a new home to beat the cost of rising materials on their new build.

Want to know more about how we price our homes and how we’re navigating getting the best materials? Reach out to [email protected] or leave a comment.