The 2021 Treated Lumber Shortage and its Effect on the Construction Industry
Everyone in the construction industry has been affected by the treated lumber shortage, whether you’re a professional contractor or a do-it-yourself homeowner.
Project costs have risen due to the increase in lumber costs, leaving many builders short on cash or considering whether it’s financially practical to take on certain jobs.
If your wallet and cash flow are taking a hit because of the lumber shortage, keep reading to find answers to these questions:
- Why is there a lumber shortage?
- Why is treated lumber so expensive right now?
- How is the pressure-treated wood shortage affecting the construction industry and your cash flow?
- How can I keep my company cash flow positive?
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If you’re feeling the pressure from the lumber shortage, Flexbase can help with easy access to working capital.
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In addition to accessing working capital, Flexbase offers the following services:
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Is There a Lumber Shortage?
This question is easy to answer.
Yes, there is a lumber shortage.
And because lumber remains in high demand, lumber prices are skyrocketing. According to Bloomberg, lumber prices have more than tripled since the start of the Covid-19 pandemic, reaching an all-time high of $1,157.50 per 1,000 board feet.
In 2019, a simple decking job would have cost between $1,500 and $5,000, but that same job today would cost between $4,400 and $10,000.
Why Is There a Lumber Shortage?
Most people today blame the lumber shortage on the shutdowns prompted by the Covid-19 pandemic.
Though the shutdowns absolutely play a role, there are other reasons that contribute to the treated lumber shortage.
The Covid-19 pandemic affected everything across the globe, including lumber production.
Because of social distancing guidelines and other mandates, many businesses across the nation decreased their workforce resulting in fewer workers and lower production.
And lower production was not just a problem in the United States.
Because we get lumber from other countries like Canada, Germany, and China, countries that have also been severely affected by the pandemic, their lower production also makes an impact on how much lumber we can import.
With many people quarantined at home for weeks or months at a time, do-it-yourself projects took off.
Many homeowners took advantage of the extra time at home to take care of some construction projects around the house.
Even during the pandemic, many home improvement stores kept their doors open, and people loaded up their trucks with the varied combination of needed supplies.
Lumber was especially needed for the extensive amount of deck building that took place during the Covid-19 pandemic.
Now that construction workers are getting back to work, new home construction is on the rise.
Many cities across the nation are along for the ride and are “raising the roof” for new homeowners.
The top 10 cities building the most homes are:
- Dallas, TX
- New York, NY
- Phoenix, AZ
- Washington, DC
- Atlanta, GA
- Los Angeles, CA
- Seattle, WA
- Philadelphia, PA
- Charlotte, NC
- Tampa, FL
This demand for new home construction further exacerbated the lumber shortage problem.
Why Is Treated Lumber So Expensive Right Now?
It’s a basic rule of economics — high demand + low supply = higher prices. The demand for lumber has bounced back faster than lumber mills anticipated, and they simply can’t keep up with the demand.
The National Association of Home Builders (NAHB) reports that lumber prices have risen by 130% since mid-April 2020.
For example, OSB board prices were three times higher in September 2020 than they were at the same time in 2019.
Other prices have also soared like:
- Western SPF 2x4s have increased 158%.
- Studs have increased 164%.
- Southern pine has increased 147%.
How Is the Pressure-Treated Wood Shortage Affecting the Construction Industry?
Acquiring lumber necessary for a project, controlling project timelines, and managing cash flow are all ways the treated lumber shortage is significantly affecting the construction industry.
Sourcing Issues
Everyone, whether homeowners or builders, is experiencing difficulty in getting the wood supplies they need.
For example, one lumber supplier in Wichita, Kansas, describes their short supply when he reports, “We typically have a 30 to 45 day supply of material, we’re in the 3 to 5 day supply of material.” (Jay Robinson with Mill Creek Lumber)
Major companies, who have the means to buy larger amounts of lumber at one time, are buying out lumber supplies and leaving the little guys wanting.
When home improvement stores and other suppliers can’t keep lumber in stock, everyone loses.
Project Delays
Project delays are often a common problem in the construction industry, but a shortage of important materials makes delays even more troublesome.
Work on a job can come to a screeching halt when you must wait for supplies to be sourced and delivered.
In the end, project delays cost money — money most construction companies don’t have to spare in our current situation.
Increasing Capital Requirements
Because of the lumber shortage and the domino effect it is having, many companies are running into problems with working capital.
Owners and developers are having to pay out more capital to fund projects due to increased pricing. In turn, contractors also have to pay more to their suppliers but may not have the cash available.
Flexbase can help.
With our working capital feature, you can borrow capital that will increase your cash flow instantly.
It’s easy, and it’s all done within our app.
How to Ensure the Treated Lumber Shortage Doesn’t Affect Your Cash Flow
If you are like most others in the construction industry, you are feeling the hit of the treated lumber shortage.
What can you do to make sure you have a positive cash flow to keep your company on top and maintain your project timelines?
Communicate Effectively and Often
Communication goes a long way when dealing with uncertainties and unexpected changes — especially when it concerns recouping payments.
And when those changes occur, requesting a change order may be the way to go.
The change order will alter the details of the project regarding the scope, cost, and timeline. Not only does it change these specific details, but a change order can offer some extra security if there is a dispute about payment.
Apply for Working Capital if Needed
Even with good communication and a change order, you may still struggle with the capital you need to keep your projects going.
Borrowing working capital can help you get over the cash flow hump until the lumber shortage eases up.
And if just thinking about ...
- Going to the bank
- Filling out forms; and
- Negotiating amounts and rates
… exhausts you, there is a better and easier way.
Flexbase can help you apply for working capital in our app with one simple click.
Send Detailed Pay Apps
Sending a thorough pay application is another way to help you manage through the treated lumber shortage.
A pay app is an invoice in the construction industry that allows you to get paid for work you have already done. Making it extremely detailed will help you to avoid any opposition along the way.
Pay applications can easily be created with the Flexbase app.
Send Relevant Notices
Sending relevant notices promptly can also help protect you during a supply shortage that affects your cash flow and project timelines.
Notices that you should consider sending include:
- Preliminary notices
- Demand letters
- Lien waivers
- Intent to lien
Filing a mechanics lien is usually a last resort, but every contractor has a right to file a lien if they are not paid — as long as they have sent all the appropriate notices.
When done correctly, filing a mechanics lien can get the attention you need to get paid and can help you get paid quickly. A mechanics lien is an important tool in your arsenal in the event you need to use it.
Flexbase makes this process easy as well. We will file a lien on your behalf for free.
Whether you are dealing with a lumber shortage or not, Flexbase has all the tools you need to keep your business running smoothly with working capital at your disposal.
Flexbase makes borrowing capital easy and quick when we use your payments data to give you the best rates from our lending partners.
On top of that, Flexbase offers other tools like …
- Invoicing
- Friendly reminders
- Compliance forms
- Integrated software
- And much more
… to keep you focused on growing your construction business.
And the best part is there are no subscriptions or licenses — we get paid only when you get paid.
Construction finances and paperwork don’t have to be difficult and complicated. Schedule your free demo today.
