Lumber prices affect housing development in Grand

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photo by Kim Cameron | Lumber is stacked on top of lumber, waiting to be milled by Confluence Timber Resources in Parshall.
photo by Kim Cameron | Lumber is stacked on top of lumber, waiting to be milled by Confluence Timber Resources in Parshall.

by Meg Soyars
Last year, the pandemic put the world at a standstill, but home building and demand for lumber actually increased, especially in popular resort communities like Grand County. This has caused lumber prices to skyrocket, adding roughly $35,000 to the cost of a new single-family home, according to the National Association of Home Builders.

The Cost to Build
“Lumber prices are an issue throughout the country, but it is amplified here because the cost to build is already more,” said Dave Fiala, owner of Colorado Timber Resources. CTR is a Parshall-based mill which harvests primarily beetle kill pine on both federal and private lands.

Fiala explained that lumber is a commodity, and the market, volatile since COVID-19, sets the price. Lumber mills, builders, home improvement stores, and property owners have all had to adapt in this ever-changing economy.

“The cost of lumber now is over 250% higher than it was last year,” said Brandon Frank, manager of Alpine Lumber, a lumber store in Granby. “When COVID first came about, people started working from home and realized they needed a bigger space. Or they decided they don’t want to live in the big city anymore. So people are moving to the suburbs, or even out here to the mountains, since they can work remotely.” The appeal of mountain life in Grand County is stronger than ever. But the lumber supply needed to build or remodel houses stalled during the nationwide shutdown.

“Over the course of those 3 months when everything was shut down, it was equivalent of 70,000 homes’ production being lost. Everybody in our industry forecasted a recession,” Frank said. “A lot of companies laid off employees.” No one expected the need for lumber to boom so quickly after quarantine.

“Every mill now is producing as much as they can to sell,” Fiala said. Colorado Timber Resources was shut down at the height of quarantine and has now been ramping up production to make up for lost time. “We have federal, state, and local contracts for timber here, so we harvest those and bring them into here. We can sell every 2×4 and 2×6 that we make,” Fiala stated.

But even with as much as the mills are churning out, they’re still facing backlogs trying to meet demand, Fiala explained. “Homebuilders in this area that I’ve talked to are booked out. They have more home starts than I think they ever have, and I’ve heard

people are turning away business because they don’t have the labor supply.” On top of this, there are difficulties transporting lumber too.

Trucking on Hold
The trucking industry, the vital veins that transport lumber around the country, was especially hard hit during COVID-19. “On the West Coast especially, they’re having a hard time getting rail cars and trucks into the mill to get the material loaded in a timely manner,” Frank said. “They’re just so behind that sometimes the mills have to load the trucks straight from the saw.” Frank explained how the pandemic disrupted the entire trucking system. “Big businesses have had a huge uptick in sales. So Amazon and all the Wal-Marts and big-box stores had even more trucks sent to them.”

According to businessinsider.com, trucking makes up more than 70% of freight shipped in the US. But when there is no one to drive, there is no way to transport lumber off the mills. “I’ve read that around the country, we are short about 60,000 truck drivers,” Fiala stated, adding that the industry will need to hire over 1 million new drivers in the next decade. The situation is a double-edged sword; the trucking industry, like the construction industry, is short-staffed.

The Effect on Affordable Housing
Fiala explained how the labor shortage is inexorably tied to the county’s affordable housing shortage, another issue exacerbated by lumber prices. Workers aren’t available to build homes if they have nowhere to live themselves. It’s a vicious cycle. “The cost of land here is high because it’s designed more for recreation than affordable or multi-family housing,” Fiala added. “The price per square foot [to build] has gone way up. So builders would rather make a million dollar home than a $300,000 one.”

Fiala explained the affordable housing shortage prompted Colorado Timber Resources to seek their own employee housing to keep the company sustainable. “We’re doing it ourselves,” Fiala said. “We’re looking to purchase properties in Kremmling, Hot Sulphur, or Granby. Tabernash is probably the farthest someone would want to drive. It’s hard to find labor, so we want people to live close to the job.”

Frank believes that right now it isn’t feasible for companies to create affordable housing. “Maybe there is something in the pipeline I don’t know about, but the way things are now, it’s hard for builders to cut costs,” Brandon Frank said. “They’re in the business to make money too.”

Rebuilding Grand Lake
Affordable housing has also been put on hold while the construction industry is concentrated on rebuilding Grand Lake. The East Troublesome Fire that ripped through the area in October left home-owners with few options, especially during a pandemic that drove up lumber prices.

“I’ve heard from home builders locally that people were insured for, say, $500,000 but now it will cost $700-800k to rebuild their home and they don’t know what to do,” Fiala said. “They’re not fully insured for rebuild costs.”

“Grand Lake’s a beautiful area but that fire was devastating,” he continued. “So people have to decide if they can afford to rebuild or should move somewhere else.” Fortunately, Colorado Timber Resources is assisting. “We’re working with Grand County Builders Association to supply lumber to the homes that were destroyed in the fire to alleviate some of the cost burden for people to rebuild,” he said.

According to Frank, new Grand Lake homes are much more expensive than the owner’s former homes for myriad reasons. “Lumber makes up 20% of the home’s entire cost. But it’s not just lumber that’s high, it’s plumbing and electrical too,” he said. “Building materials like OSB, subfloor adhesive, even appliances, are expensive across the board.” Not all hope is lost, however! Frank added that some people in Grand Lake are moving forward to rebuild and the area is slowly coming back to life. Currently, Alpine Lumber ships lumber packs to Grand Lake to assist homeowners who have demoed their homes and are ready for the next step of construction.

What’s Next for Lumber?
In a volatile market, it’s hard to predict what will happen next. Frank explained how lumber prices change hourly, sometimes increasing, sometimes decreasing, but not yet down to pre-pandemic levels.

“Demand is outpacing supply and until supply meets demand, we won’t see a big decrease in lumber prices. And even when it does fall back, it will be hard to forecast what the new normal will be. It might not fall too far. It could be half of what it is now, or even more, which is still 200% higher than it used to be,” Frank predicted.

He theorized that construction may become so expensive that people will stop building homes at such a high rate. “Interest rates may go back up, or people just can’t get approved for a mortgage on a home that’s one and a half times more than it used to be,” he said.

Only time will tell how far lumber prices will drop, and how this will affect the construction of the county’s affordable housing and the rebuilding of Grand Lake. But one thing is for certain: after the pandemic shifted lifestyle priorities, people are called to live in the beautiful mountains of Grand County more strongly than ever!