How Lumber Supply Affects Housing

If you’re building a new home, thinking about one, or have bought lumber for a home renovation project recently, you’ve likely seen media reports about supply constraints and sharp price increases in wood products — specifically pressure-treated wood, plywood and framing lumber.

A big part of what you’re seeing now is the lag effect from COVID-19 on the supply of lumber and other building materials: Earlier this year, factories and mills around the world were shut down for weeks or months. Lumber production experienced a 34-per-cent reduction in April.

And while mills are back up and running now, in the interim we’ve used up the inventory that was sitting around and new supply is having trouble meeting demand.

Other factors have also combined to bring on this perfect storm:

• Early forecasts expected low demand for lumber in 2020, which led to production curtailment before the pandemic;
• COVID-19 has affected interprovincial and international shipping and supply chains, and;
• There has been much stronger spring and summer demand than anticipated in Ontario and across Canada and the United States (because a lot of us did a lot more home improvement projects).

At this point, it is expected supply issues in Ontario may extend into late this year.

For those who are having a new home built, this means they may see delays in construction or closing timelines. Recognizing that this unexpected situation may result in a delay in both the completion and occupancy of new homes and builder warranty requirements, Tarion has issued an advisory with important information for homeowners and builders. If this affects you, I urge you to check www.tarion.com.

Or you may see major wood deck and fence installations postponed until next year.

The key to easing supply shortages and price increases is having federal and provincial governments work with domestic lumber producers to ramp up production, support back-to-work transitions for workers, and continue to strive for avoidance and timely resolution of trade disputes (including recent actions by the U.S. on steel and aluminum).

These issues are not only affecting housing affordability but jobs as well — home builders in other parts of the country have decided to pull residential lots off the market because they cannot confidently price construction for a home that is two years away from being complete. Luckily, we have not seen this here in Ottawa.

Ottawa’s housing market has not felt much effect from COVID-19 directly up until this point. But given the housing supply shortage that continues to place upward pressure on home prices, it is important to resolve material shortages as soon as possible.