Homebuilders under pressure as material costs go through the roof

From homebuilders to backyard renovators, many Canadians have been feeling the impact of theprice of lumber and other materials doubling or tripling during the pandemic.

Roy Nandram knows all too well.

The builder and former president of theGreater Ottawa Home Builders'Association has been watching his material costs spike on a nine-home development in the Experimental Farm area.

Two by fours that cost him$3 in January 2020are more than$10 each now. When he adds up the currentmaterial cost on a2,000-square-foot house,he sees$18,000 in new expenses thatmust come out of his own margins.

At the same time, every house has jumped in value.

"We'll be happy if some of [the buyers]walk away because we could sell these homes for at least [a hundred thousand] or $150,000more," said Nandram.

Prices going up, stock dropping

Victor Jung decided to replace a deck at his Val-des-Monts, Que., home this spring with wood from a sawmill specializing in eastern cedar inBouchette, Que.

However,in the seven days between placing his $3,500 orderandpicking it up, prices had already increased and stock had nearly vanished.

"It was quite funny because he said he's never had orders from Tadoussac and Rimouski before," said Jung.

It's the same unfamiliar volatility PaulMcElligott atCasa Verde Construction has been experiencing.

"When I get quotes for cedar decking, I'm being told that Ihave three to four days to act on that price and that it could changeand it usually does!" said McElligott. "It's a little crazy."

Plywood in demand

Lumber isn't the only building material skyrocketingin price. A sheet of-inchspruce plywood that cost $35 before the pandemic is $112 this month.

Bourhan Hamadrecently discovered how valuable plywood has become.

High-resolution video surveillanceshows two men in an aging pinkChevy Silverado pulling up in front ofHamad'sOttawa hair salon.

In broad daylight, the pair strolled across his yard, lifted up the plywood ramp Hamadhad been usingto ease his renovation project and slidit into the waiting truck.

Hamad saidhe was doubtful of seeing his ramp again.

Home builders feeling the crunch as cost for materials rises during pandemic

3 years ago

Duration 1:45

Roy Nandram, president of RND Construction, says the cost of construction materials has skyrocketed during the pandemic, leaving many builders on the hook for the increases.

'It's impossible to run a business that way'

"I don't think everybody would have predicted a worldwide pandemic would have caused a worldwide housing boom," saidKevin Lee,CEO of the Canadian Home Builders' Association.

"It's astronomical."

Leepoints to the skyrocketing price of oriented strand board (OSB) often used as sheathing in new construction, jumping from $300 for 1,000 square feet last year to $1,800.

Lee says builders are adding price-escalation clauses to protect themselves.

"It's one thing when pricesgo up fiveto 10 per cent, but when prices are doubling it's impossible to run a business that way," he said.

Could return to normal later this year

It's the law of supply and demand that has converted buildingmaterial centresfrom lumber barons to lumber barrens.

Millions of homebound people with money to spend turned their energy to new decks, fences and home improvements leading to aspike indemand. The pandemic pulled the plug on many North American sawmills, reducing supply.

Its good old economics 101: Why the cost of building materials has risen during the pandemic

3 years ago

Duration 1:14

Kevin Lee, CEO of the Canadian Home Builders Association, says the pandemic set off a building boom, with demand for construction materials outstripping supply and leading to price increases.

Bank of Montreal economics forecaster Art Woo saida forest products company that wished to cash inon the lumber boom today might nonetheless still not be producing any actual lumber from that mill for twoto threeyears.

"A lumber company can'tjust open up 10 new sawmills," saidWoo, illustrating the inelasticity of supply.

However, Woo called the current lumber prices "unsustainable" and his office's latest commodities forecast has prices beginning to return to normallater this year.