6 Smart Reasons to Put Off That Renovation Project as Lumber Prices Soar
Home renovations are never cheap. But the soaring cost of lumber is making that statement especially painful.
Thanks to a lumber shortage, your everyday 2×4 is now more than the cost of a Chipotle burrito. That might not sound like much, but just a year ago, you could get a 2×4 for around $2 to $3. The price of a Chipotle burrito today? About $7, more with extra fixings.
You can get creative and you can save on labor by rolling up your sleeves and doing the work yourself, but you still have to get your hands on the lumber. Some resourceful DIYers in Alaska are even milling their own just to keep their projects going. That’s not the likely path for most of us but desperate times call for clever measures.
Thomas Jepsen, founder and CEO of Passion Plans, a digital platform for house plans, blueprints and more, said that the price jump has caused new single-family homes to go up by about $25,000. Though the analyses by experts vary, most in the industry agree that lumber prices have soared somewhere between 200% and 400%.
Lumber futures fluctuated wildly in mid-May and the high prices stifled demand. But even then, there’s not enough lumber to go around for projects in the works.
To find out what rising lumber prices could mean for both homeowners considering renovations and potential buyers considering building a new home, we turned to industry experts for their insights. Their suggestions also indicated that it might be a good idea to wait to renovate.
Why are Lumber Prices So High?
Lumber price hikes have been fueled in part by the inspiration from popular TV home makeover shows and millennials buying historic old homes with big plans of renovating and updating them. Working, schooling and just being at home more because of the pandemic has also created the appetite for more home projects.
And if Americans aren’t renovating their homes, they are taking advantage of historically low interest rates and building their dream homes from scratch instead.
But an increase in renovation and home building is only one part of the equation. Add to that a fall in lumber production because of mills and factories closed due to quarantines and state orders, and then supply chain issues. And there’s more.
“Honestly, if I had to come up with a term for this present time, I would call it ‘the perfect storm,’” said Jepson, who has been in home improvement for a decade. “The beetle infestation has caused havoc in Canada and everyone expected the construction industry to halt with COVID, which is why supply was additionally limited.”
For decades, Canada suffered from a massive outbreak of bark-eating pine beetles that devastated harvests of trees grown explicitly for lumber. And because one plague was hardly enough, British Columbia also witnessed a rise in wildfires at the same time.
Canada is the world’s second largest exporter of softwoods, right behind Russia which moved into the No. 1 position last year, according to International Forest Industries. The loss of forests is one of the reasons that Canada moved to No. 2.
“These are completely unprecedented times,” Jepsen said. “There are many projects being canceled and halted. I’ve seen massive homes with tarps over them as they’ve sometimes been halted when contractors refuse to honor the contracts they’ve had after not factoring in the potential for a lumber price increase.”
When Will Lumber Prices Go Back Down?
What goes up must come down. Unless it’s lumber prices.
That isn’t to say lumber prices won’t go down at all.
“Lumber prices will fall,” Jepsen said. “Supply will pick up, DIYers will go back to the office and things will somewhat normalize. However, the effects of the beetle infestation are very real, as are the effects of increased wildfires from warmer climates, and I doubt we’ll see lumber fall to pre-COVID levels.”
One thing remains clear among all the predictions: Prices may drop, but we’ll never see pre-COVID lumber prices again.
How to Save Money Amid High Lumber Prices
Rising lumber prices don’t mean you have to cancel your dreams of buying a new home or tackling a home renovation project. You just might have to change your strategy.
For example, if you’re thinking of home renovations, ask your contractor or architect to get creative.
“We’ve seen, and used, some creative ways to use reclaimed wood to the extent possible,” Jepsen said. “We’ve sourced a lot of it through Craigslist and otherwise reached out when buildings have been taken down. Some of it has been able to be salvaged and reused.”
You can also think about other, lumber-free renovations you could tackle, said Phillip Ash, founder of Pro Paint Corner.
“I suggest tackling any bathroom work you may want to do during this period, or use the summertime to work on some landscaping to give the outside of your house a facelift,” he said. “One of the easiest and most impactful home renovation projects would be to give your house new exterior and interior paint colors.”
Why You Should Probably Wait to Renovate
We bought an old house last September and it’s got a daunting 30+ steps up from the street to get to the front door. While it is in decent shape, the roof deck that was carved out of the attic back in the 90s has seen better days.
Our goal was to rip out all the rotting wood and start from scratch this spring. The projected cost of such a renovation was about $15,000.
But now? Contractors are saying it’ll easily be $30,000 — and that doesn’t even include the awesome new grill I had promised myself.
Needless to say, we’ve decided to postpone the project by at least a year and just hope our feet don’t crash through any rotted wood while enjoying the deck this summer.
In Jepsen’s eyes, that’s a wise choice, given not only the lumber shortage but also a troubling shortage of appliances and rising steel prices, plus the high labor costs of in-demand contractors.
“Homeowners, to the extent possible, would do very well in delaying renovations for a year, which should also help with the price of appliances,” he said. “I also expect that we’ll be in a much better position in terms of addressing the labor shortage at that point too, as the effects of stimulus money will have subsided.”
Jepsen’s advice seemed to reflect how many homeowners feel. According to a recent Fortune-Researchscape International poll nearly four in 10 would-be DIYers have postponed a project because of skyrocketing costs.
But that doesn’t mean DIY has stopped entirely. In May, Ted Decker, president and CEO of The Home Depot, spoke in an earnings call specifically about DIY customers: “The strong demand we saw during the back half of last year continued during the first quarter. From gardening and organization, new and existing customers are engaging with home improvement.”
When asked more specifically about the lumber shortage during a Q&A, Decker said, “A sheet of OSB (engineered wood) has quadrupled in price, and it’s up even more since the end of our fiscal quarter. But at the same time, demand has kept pace.”
For what it’s worth, Jepsen does not recommend postponing building a new home: “We’ve seen a shock to the market with rapidly rising house prices, and they’re only bound to go up. Building a home is still investing in an asset that is bound to appreciate over time.”
6 Reasons to Wait to Renovate
Still not sure whether you should renovate this year or wait it out? Here are six reasons to pump the brakes on your home renovations based on what the experts told us:
1. Prices Are Likely to Fall
The jury may be out on when, but lumber and appliance prices will go down again. While they won’t likely return to pre-COVID times, they should at least drop to a price tag more affordable than today’s high costs.
2. You’ll Have More Time to Save
If you postpone your renovation for a year, you can invest that money smartly. Put it in a high-yield savings account to accrue interest, or if you can wait a few extra years, consider going the bond route. If you’re a high-risk, high-reward gambler, you could even invest the funds in the stock market. While it’s inherently risky, the stock market tends to yield about a 10% annual return, on average.
If you were planning to pay out of pocket for some of the renovation and finance the rest, this could be a way to reduce the amount you have to borrow from a lender when the time comes.
3. Contractors Are Scheduling Far Out Right Now
We are having storm windows put over our historic wood windows to help with insulation (and to give us easier-to-use screens in the warmer months). We paid the deposit at the beginning of May, and the company has promised work will start by mid-August.
That’s not an isolated experience. Because of high demand, contractors are scheduling several months out. If your renovation involves multiple contractors (masons, plumbers, electricians, carpenters, etc.), coordinating their schedules could be impossible — and could leave your house a construction zone for multiple months.
4. The Threat of COVID-19 Will Fall
With the number of vaccinated Americans growing every day, it makes sense to hold off on renovations. By next year, if all goes well, we will have reached herd immunity, and you can feel more comfortable about contractors working in your home sans mask.
5. Consider the Quality of Work
Newly built homes are flashy when they are first constructed. But because some developers use less expensive materials and contractors are rushing to crank out as many houses as they can on a tight timeline, buyers often find the honeymoon phase with their newly constructed home doesn’t last long.
This was evident following the housing boom of the early 2000s when, a decade later, remodelers began to see an increase in defects in the homes that were quickly built in that timeframe.
I’d like to believe most contractors will recommend high-quality materials and do a thorough job, but at a time when supplies are low and contractors are in high demand, there is the inherent risk that workers may take shortcuts on your renovation projects that lead to lower-quality work.
6. You Might Avoid an Impulse Buy
Renovations are the thing right now. Seeing everyone’s Instagram posts about their new kitchens and bathrooms can stir up a longing in you as you endlessly scroll. But by giving yourself a year to think about the renovation, you can decide if it’s something you actually want to spend your money on.
If, after a year, you’re still willing to put down $20,000 on a new kitchen, you can feel more confident in spending that money.
Timothy Moore is a managing editor for WDW Magazine and a freelance writer and editor covering topics on personal finance, travel, careers, education, pet care and automotive. He has worked in the field since 2012 with publications like The Penny Hoarder, Debt.com, Ladders, WDW Magazine, Glassdoor, Aol and The News Wheel.