Lumber, wood, timber… Whatever you want to call it, it’s one of the most important construction materials you can use when building anything from houses to furniture and everything in between.
But why exactly is lumber so expensive?
When you are remodeling your home or constructing a new one, lumber will likely be one of the largest expenses you’ll encounter.
To determine whether your lumber expenses are inflated and if so, by how much, you need to understand why lumber prices are what they are and what factors affect them.
Why Lumber is So Expensive
The price of lumber has increased substantially in recent years. As a result, many new construction projects have been canceled or put on hold.
To understand why lumber prices are so high, it’s important to look at why they fluctuate over time.
Below are ten reasons why you may be paying more for your wood right now.
1. Supply and Demand
While there are many reasons why lumber costs so much, one of them stems from supply and demand.
As construction booms in areas like California and Nevada, for example, demand for new homes skyrockets.
The increased need for materials causes a higher price on home-building products (like lumber).
Supply has remained relatively constant in recent years and that’s led to higher pricing across all materials, which then trickles down to prices on finished homes.
2. Regulatory Requirements
One reason why lumber is so expensive in North America is that there are a lot of regulations controlling how wood can be harvested.
Regulations prevent clear-cutting, protect endangered species and limit or prohibit logging during certain seasons.
These regulations increase both production costs and prices paid to timberland owners.
Wood production costs in North America are highest in Canada and lowest in Africa, where a lack of political stability and weak environmental protection laws contribute to lower lumber prices.
3. Natural Disasters Affect Prices
One of the reasons why lumber prices are so high is because recent natural disasters have affected their production.
For example, a massive forest fire destroyed many lumber resources in northern California.
Due to the growing demand for timber, especially from emerging markets such as China and India, these kinds of natural disasters will continue to influence timber supply and price.
Investing in lumber could be tricky because you need to consider environmental factors as well as supply and demand issues.
The problem for investors: You don’t want to be stuck with loads of lumber if a nasty flood or hurricane hits your area.
To invest in lumber, it’s important to get input from experts on what you should buy and when you should sell it based on all market factors.
4. Energy Costs and Availability
According to BusinessWeek, energy costs account for about 15 percent of construction material expenses.
This percentage can grow as high as 25 percent for materials such as asphalt shingles, insulation, and lumber that require lots of heating and cooling to transport.
High energy costs make it more expensive to produce materials, which are then passed on to consumers at a higher price.
The price can vary widely depending on where you live; in areas with high electricity prices, lumber tends to be more expensive than in areas with low electricity prices.
5. A Strong Housing Market
A strong economy can bring about a strong housing market.
When Americans feel confident in their financial situations, they tend to open their homes to extensive home renovations.
These improvements are often expensive, which means an uptick in demand for lumber products.
While there’s not much that you can do about a strong economy, it might help you sleep better at night knowing that many of your neighbors aren’t going without during tough times—and they’re putting money into your pockets!
6. Tariffs and Taxes
There are a lot of complicated rules and regulations that govern how lumber gets from a tree to your home.
Several organizations, including local municipalities, provincial governments, and even national governments are involved in lumber transportation.
Taxes get tacked on throughout each stage of transportation which can lead to lumber being a more expensive building material than it should be.
7. Regional Weather
Different areas of North America will have a different average cost of lumber.
However, all other factors being equal, weather and seasons are two things that can play a major role in how much you pay for lumber.
For example, it costs a lot more to get wood to your home if it has to be shipped hundreds of miles by train or truck in harsh winter conditions than if it’s coming from down the street—and so you should expect to pay more for that far-flung wood.
Similarly, there’s something to be said for buying up trees after a forest fire or other natural disaster:
Rebuilding homes quickly means that fallen trees become available as lumber at very low prices.
8. Dangerous Working Conditions
Logging is one of America’s most dangerous professions, according to a recently released report from Colorado State University.
Loggers are three times more likely to be killed on the job than police officers and seven times more likely than firefighters.
In fact, for every 100,000 full-time logging workers in 2020, 21 were killed on duty — that’s nearly double construction worker deaths and five times as many as farmers or ranchers.
As well as having higher fatality rates, loggers also deal with increased injury risks due to cutting and falling trees.
The statisticians at CSU say these higher rates stem from inadequate safety training and protective equipment (such as fall-prevention tools) that would otherwise reduce death or injuries in other occupations.
9. Labor Shortage and Availability
There’s a labor shortage in many parts of North America, especially where there are forests.
People who work in logging and sawmills are pretty highly paid and there isn’t an easy way to train more people to do that work.
That makes it hard for lumber producers to find enough workers at a time when demand for lumber is high.
With fewer workers available, loggers have had to hire subcontractors and those contractors have raised their prices or been less competitive on price because they have fewer options.
The availability of labor has also pushed wages up so that even if producers find enough workers they are paying higher wages which increases costs and leaves them with less money on hand to purchase machinery or upgrade operations that might otherwise reduce their costs.
10. Logistical Costs
Getting lumber from one place to another cost a lot of money.
Most forest products are found in remote areas, which is part of why they’re so expensive.
To take a random example, shipping four thousand board feet (i.e., four thousand individual pieces of wood cut to standard length) of southern yellow pine (used for things like 2x4s and framing) costs $138 in Georgia; that’s roughly $1 per piece.
This makes sense when you realize that freight rates to remote parts of Georgia can be higher than to major cities like Chicago and Los Angeles.
11. Rare Types Of Lumber
The most common types of lumber are pine, hemlock, spruce, and cedar.
These woods are widely used in construction because they’re relatively inexpensive. However, other types of wood fetch a high price due to their rarity.
Mahogany is one such wood and it can be quite pricey; while it isn’t rare globally, mahogany trees grow only in Central America and parts of South America.
Other expensive types of lumber include teak (native to Southeast Asia), ipe (native to South America), and kosso (native to Nigeria).
It takes years for these trees to reach maturity, so you can see why demand remains high even though there’s plenty available.
Before a log can become lumber, it must be transported to a mill and then through several processes, each of which adds more expense.
In some cases, logs are trucked hundreds of miles away to be processed into lumber. Processing costs include fuel, labor, and upkeep of equipment.
The expenses add up and ultimately get passed on to you in higher prices for wood products like lumber.
A study from Washington State University estimates that processing costs account for about 40 percent of cost increases in harvested wood products between 2020 and 2021.