Builders FirstSource provides market outlook and projections
Executives from Builders FirstSource (BLDR) recently provided a view of the lumber and building materials landscape in 2023 and what might be ahead in 2024.
When compared to the past three years, the lumber and OSB market looks flat in regard to pricing.
“But compared to historical norms, the market has been volatile,” said Steve La Valley, vice president of forest products and transportation at BLDR. La Valley delivered his comments during the dealer’s recent Market Intelligence webinar.
The baseline price of lumber has been the difference. In the pre-pandemic years, the average was $354 from 2010 through 2019. But in 2023, the baseline has increased to an average of $416.
The OSB baseline follows a similar trend with an average baseline of $288 between 2010 and 2019. But in 2023, the average OSB baseline is $369.
“That’s almost a 20% increase in the baseline,” LaValley said. “This year is one of the most volatile, taking out the last three years.”
Manufacturing prices for lumber are also on the rise.
According to Builders FirstSource, while the rate of inflation has decreased, higher production costs are now embedded in manufacturing businesses with prices likely to only increase going forward.
The current supply of lumber is enough to meet the demand of 1.3 to 1.4 million housing starts in 2024, La Valley said. Additionally, OSB production capacity is expected to come online in late 2023 and 2024, which should also provide relief.
But if starts were to trend above 1.5 million for several months next year, it could stress supply resulting in greater volatility and spikes in prices, La Valley noted.
The good news is that major manufacturers invested heavily in capital improvements at their facilities in recent years. This includes acquisitions, the opening of new plants, increased automation, and higher overall capacity.
“This has helped position them for additional growth in housing,” Rettig said. “BFS alone has invested millions in truss capacity and door production so that we can meet our builders demand going forward.”
Given an uptick in new home sales and housing starts, fueled by a lack of existing home on the market, recent moves by manufacturers have been able to keep up with market demand.
Labor remains an obstacle, however. The capacity is there, but hiring the labor required to run additional shifts could take some time, Rettig said.
While increased automation will help offset a shortage of labor the issue is expected to remain going forward. Labor wages, along with recent rises in transportation and energy costs, also play into increases in product costs.
“Builders FirstSource Supply Chain is actively working to take cost out of the channel by partnering with suppliers and customers in building greater efficiencies together,” La Valley said. “BFS has built a tremendous platform to serve the industry.”
