High lumber prices in the 2021 roofing season are impacting how roofing companies operate.
This has resulted in many roofers feeling frustrated and lamenting the costs that have in some cases drastically affected their bottom lines.
“Contractors have been making jokes about the cost of plywood, but it’s not that funny if it’s costing you a lot of money,”
says Roofing Insights CEO Dmitry Lipinskiy.
“A lot of contractors are actually losing jobs, money, and profits because you can’t always pass your cost to the consumer. If you already have a contract and you guarantee the price, you will be on the hook.”
In some cases, the price of plywood and lumber has increased by as much as five times the price as it was last year.
There are a number of reasons why the cost has gone up so much, and in this article Lipinskiy will give you his four reasons as to why this is the case.
Hint: the rapid price increases cannot solely be attributed to the COVID-19 pandemic.
Keep reading to learn about the four main reasons lumber and plywood prices are so high!
1. Supply and demand
Currently, the supply and demand market is out of sync because many experts were predicting the housing market would crash, but instead the market has trended in the opposite direction.
“We are building more houses than ever. People are actually investing in building homes because they want to stay at home, and they understand that the new rules are here to stay for a little bit longer,”
In addition to being indoors for longer durations, homeowners are also using the extra time to upgrade different parts of their home because interest rates have been lower than usual.
“If you had a smaller house and wanted to upgrade, the market was so short, and people decided to build. You also have very low rates. Everything contributed to building more homes,”
2. DIY home renovations
When people decide to remodel their homes, they then rush to Home Depot and Lowe’s to buy a lot of lumber and other supplies.
This benefits Home Depot and Lowe’s immensely, and it also means that with more people buying materials, the more that infringes on the supply and drives up prices for contractors.
While this could be interpreted as a negative for contractors, in actuality it will benefit them because many homeowners will need assistance on a lot of these home improvement projects.
“Not only are we building more, but now we have homeowners who are remodeling their basement and building decks because they are staying at home,”
3. Recent natural disasters
Just recently, the state of Texas was drilled with ice storms and ice dams, which led to a large demand for roof repairs and roof replacements.
“The storms affected everyone,”
“It affected the entire country, so when you have such a big demand and not enough supply, what do you think is going to happen?”
“Those middlemen, whether they are big box stores or suppliers, are also entrepreneurs. What would you do when you have a lot of demand but not a lot of supply? Organically, you would want to raise your price. You don’t want to give it away for free because you also want to stock up. You want to buy as much as you possibly can because the price keeps growing.”
4. Everyone is stocking up
In response to the growing demand for plywood and lumber, many contractors have begun stocking up on materials to avoid later running into supply issues.
This strategy has gone beyond just the roofing industry.
In fact, the United States Army was reported to have recently purchased $500 million worth of plywood.
“In capitalism, everyone is trying to leverage supply and demand, and in this scenario, you can’t really blame them. They’re not doing it because they are greedy. They are doing it because the competition is doing it,”
says Lipinskiy, who adds how important it is for roofing contractors to plan for unforeseen circumstances that may affect their profit margins.
“If you are a contractor or homeowner, you have to be smart about your contract and what you are putting in writing for those materials, because if you have a lot of contracts that guarantee the price without the potential increase of material cost, you will be losing a lot of money.”
Unfortunately, in 2021 some contractors have already begun losing money on contracts that did not give them flexibility in case there were price increases.
At the same time, Lipinskiy is urging contractors not to overreact to the current trends because eventually the market will stabilize.
“I don’t want you guys to worry about the price increases, but I want you to be smart about it and stop giving plywood away,”
Contractors: how much are you paying for plywood and lumber?
Let Roofing Insights know in the comments section below!