Rising Lumber Cost Trend and Unprecedented Material Price Fluctuations

The cost trends and analysis of material pricing seem to constantly be a hot topic of discussion in the construction industry and beyond – whether in response to public policy, concerns about infrastructure or the effects of the pandemic and natural disasters. Lumber costs have been front and center recently, as prices have sky-rocketed. As a company on the forefront of the construction industry, we welcome the conversation, and we would like to add our expertise. Through this blog series, we’ll examine the long-term cost trends of the industry’s most vital materials. In this edition of What the Data Says, we’re taking a look at the extraordinary rise in the cost of lumber.

Tracking Lumber Costs

Wood is overwhelmingly the material of choice in residential construction framing and the popularity of wood framing is on the rise in the commercial space. Framing aside, wood is commonly used for flooring, door and window trim, molding and trusses. It’s easy to understand wood’s popularity: The material is plentiful, durable, strong and, depending on how it’s sourced, renewable.

When we previously looked at the cost of wood in 2018, our analysis showed the cost of wood is as steady and reliable as wood itself. From 2014 through 2018, design professionals and contractors enjoyed relative price stability for one of construction’s most popular materials.

Wood Cost Index to 2018

Several varieties of wood are used in construction, so in our previous analysis of costs we developed an index of wood materials consisting of:

  • 3/4 inch BB plyform
  • 1 x 6 #2 pine boards, S4S
  • 2 x 4 kiln-dried framing lumber
  • 1/2 inch plywood, 4 feet by 8 feet sheets

The baseline for this wood index is 100 — that’s our starting point. The graph above looks at cost fluctuations in relation to that point and stayed fairly steady. But the data now shows this cost trend is rising at a volatile rate. This time we’re going to look at some of these material cost trends separately to better showcase these changes.

Our Construction Cost Database

Gordian regularly collects, validates and analyzes North American construction material costs to maintain RSMeans data, our construction costs database. RSMeans data contains more than 85,000 material, labor and equipment prices localized to 970+ locations. Thanks to the 22,000+ hours of research we devote to construction costs every year, we can examine the price of wood and tens of thousands of other line items from every corner of the U.S. and Canada.

The Dramatic Rise in Lumber Costs

Our data experts have been tracking and monitoring lumber costs even more diligently since last summer when suppliers found themselves impacted by COVID-19 restrictions and also unprepared to meet the demand, as Americans quarantining at home pursued renovations projects and do-it-yourself projects. To further increase the demand, low interest rates elevated the market for new homes causing home builders to boost production. This cost surge is a classic example of supply and demand.

According to our data analysis, the average price of framing lumber is at an all-time high — up 162% since the fourth quarter of 2019, the onset of the pandemic contributing greatly to that climb. The National Association of Home Builders calculates that current lumber prices are adding at least $24,000 to the price tag of a typical new single-family home. And while lumber cost is not a major driver of commercial construction costs, our engineers are seeing widespread, unprecedented material price fluctuations in recent quarters.

Lumber Price Chart

We’re closely tracking how retail pricing compares to future forecasts and where lumber costs will go. Our experts expect more price increases as this material trend continues to rise.

Increases Across the Board: Other Wood Material Costs

Framing lumber is not the only wood cost on the rise. Plywood costs are also climbing, in particular the raw average cost of ½ inch plywood sheets have increased 137% since this time last year.

Plywood Cost Trend Chart

The raw average material cost of pine boards is also on the rise — up 65% over the past two years and on a rising trend.

Pine Boards Cost Trend Chart

These rising price trends we have seen in recent quarters will have an impact on the cost of construction for the foreseeable future. This volatility in lumber cost hikes has stunned the market. We’ll continue to track these changes and more to keep you informed on what the data says.

Find out more about RSMeans data.

About Gordian

Gordian is the leader in facility and construction cost data, software and services for all phases of the building lifecycle. A pioneer of Job Order Contracting, Gordian’s solutions also include proprietary RSMeans data construction costs and Facility Intelligence Solutions. From planning to design, to procurement, construction and operations, Gordian’s solutions help clients maximize efficiency, optimize cost savings and increase building quality.