Lumber and Steel or Sticks and Stones: NewGround Experts Weigh in On Rising Price of Materials

Why are prices going up? It’s a question we ponder whether checking out at the grocery store or deciding whether or not to begin construction on a multi-million-dollar facility. Sometimes it may seem like the best call is to wait for prices to stabilize so that the market can settle, and things can go back down. But while waiting may seem like the best option when faced with such large price increases, the reality is that the market rarely goes back down once it has started to rise. Senior Vice President of Design and Build Operations, Mike Crane, provides his insights on the current market.

The Rising Price of Lumber

“Lumber is the first thing to consider when talking about inflation,” Mike states. “It’s a reflection of the inflation we’re currently experiencing in the country and throughout the world. Supply chain issues, lumber mills, staffing, trucking, railing, all of these different factors impact the cost of lumber and how it affects the market.”

Mike says that it all starts with the pandemic when many lumber mills had to shut down for safety reasons. This includes both local lumber mills and international lumber mills, such as those still affected in areas of China. While projects were halted and stalled, a bottleneck started to occur, resulting in a huge tipping point for projects. This bottleneck impacted various layers including corporates as well as those doing residential projects. Everyone was waiting on building materials, so once the mills opened back up again, the demand was high.

Staff Expenses Are on the Rise

“Staffing is another factor to consider,” Mike states. “In the current market, it’s harder to find employees. They’re expecting more pay, and that’s a number that won’t ever decrease. It will just continue to rise.”

Looking a few years into the future still doesn’t necessarily fix the problem. Limited resources and employee availability stretches to many different facets. Sometimes resources and materials make it to the United States only for them to be locked in port due to a lack of employees, truckers, and staff available to unload the ships and transport the materials to where they need to go. This has a key impact on the market and is often out of anyone’s control.

“Over the last 50 years, construction pricing has only deflated twice in our entire history in the U.S.; 2009 and 2010. The reason for this pricing regression was because of the recession when jobs fell 30%. However, we’re nowhere near that possibility now. Jobs are doing well and rebounding, and business volume is increasing because of the bottleneck of projects. If anything, pricing will continue to rise, because the bottleneck will only grow,” Mike says

The Demand for Steel Internationally

Lumber isn’t the only cause of building material costs going up. Steel is just as much a factor, and while it isn’t fluctuating quite as much as lumber is, the demand for steel will only rise. Large international suppliers of steel for many different countries are Ukraine and Russia. Their current political climate shifted their focus from international exports to more immediate internal concerns, leading other businesses to find their steel elsewhere.

“Since a large producer and exporter of steel has been removed from the market for an indefinite amount of time, the demand is rising for other suppliers,” says Mike. “This will lead to increased costs, and steel prices had already started to rise before the pandemic.”

Now is not the time to wait for steel and lumber prices to stabilize or decrease; they’re only rising. Too many clients are waiting for prices to go down, only to wish they would have jumped on the chance earlier, as their waiting only gained them an increase in prices.

“Nothing in our lives ever really gets cheaper, it just gets more expensive over time,” Mike says. “As productivity and production is rising and the market is slowing returning to its normal hustle and bustle, the demand for people and resources will only continue to rise higher. While the market remains complicated, one thing is clear: there will never be another ‘perfect’ time to start a project. The perfect time to start is as soon as possible.”

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