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How Builders Are Dealing With Rising Lumber Prices

As many of our NC Builders are all too aware, the United States is facing a lumber shortage in 2021. This is most likely a result of the lumber mills being forced to shut down during the pandemic; however, Americans are not blameless. During the 2020 quarantine, it is fair to assume that many people took part in DIY projects to help them occupy their time. Simply based on the definition of supply and demand, this played a part in the lumber price increase.  Fortunately, the National Association of Home Builders (NAHB), “Continues to work tirelessly to combat rising lumber prices and supply shortages by aggressively engaging with the Biden administration and members of congress”.

Recently, the NAHB asked builders about their thoughts on the rising and volatile lumber prices. Below, you will find the breakdown (percent of respondents) of, “How Builders have Dealt with the Recent Increases in Lumber Prices”:

  • Including price escalation clauses in sales/construction contracts – (47%)
  • Pre-ordering Lumber – (29%)
  • Obtaining lumber price guarantees from suppliers – (22%)
  • Otherwise delaying building or sales when costs spike – (19%)
  • Laying the foundation, then pausing before starting the framing – (15%)
  • Including shared price clauses in contracts – (10%)
  • Using lumber options or futures to hedge against future price changes – (4%)
  • None of the above – (14%)

Builders are facing unprecedented times as they continue to face unique challenges every day. Some builders are concerned about what this will do long-term to the market, “When you couple these price increases with the limited amount of supply that currently resides in our housing market, the current conditions are creating an escalating market that in our opinion will eventually be unsustainable.”

Insurance People of NC is a proud member of the HBADOC, as well as the NAHB. Insurance People has two Certified Builders Insurance Agents (CBIA) that understand the complexity of the construction industry as well as the risks that builders face. If you need anyone to assist you and your construction business, please give us a call at (919) 383-0442.

For more information on what the NAHB is doing to address the rising lumber prices and supply shortages, click this link to view their blog on the matter.