Shortages of lumber and other resources continue to plague real estate market in Teller County, elsewhere

Shortages of lumber and other resources continue to plague real estate market in Teller County, elsewhere

Editor’s note: This is the third in a series of articles about real estate in Teller County. The first one talked about the high prices of homes in addition to the lack of inventory. In the second, the county assessor talked about the increase in home valuations. This article looks at the cost of materials such as lumber for those who want to start from scratch.

In the Teller County real estate market, prices for homes escalated over the past year, while bidding wars chose winners and losers. At the same time, stimulus money from the federal government ignited the market for construction of new homes or improving the old ones.

The shutdown that began in the middle of March 2020 due to the coronavirus affected nearly aspect of the real estate market.

“During COVID we were fortunate to be one of those businesses, with our building materials, that were essential,” said Jim Olsen, general manager of Foxworth-Galbraith Lumber Co. in Woodland Park. “We thought we needed to downsize, that everything was going to shut down so we re-thought our budget, like everybody else.”

Instead of losing business, Foxworth-Galbraith became one of the busiest places in town. “People had stimulus money so everybody did home improvements because they needed to teach their kids at home,” he said. “So they’d convert a bedroom to an office, did all kinds of home repairs — whatever you can think of. And that created the supply-and-demand issue.”

As a result, lumber became a hot commodity. “There’s not enough product and all kinds of people who want it. So that’s what is driving the price up.”

The ripple effects of the shortages have impacted the delivery of goods because the trucking industry laid off drivers during the pandemic. “Once we got out of the squeeze, everybody needed truckers,” Olsen said.

The supply chains have all been affected by the closing of manufacturing plants and construction-related industries along with the layoffs of employees.

“We’re just trying to do everything moving, to keep business going and keep builders building,” Olsen said. “But it’s so hard to get labor right now. That shortage is just continuing to compound the issues.”

But business is thriving. While some residents are improving their homes, others are bringing architectural plans to the store. “People want to build houses and the price of the product hasn’t really stopped them,” Olsen said. “Because they want what they want. They say ‘just get it so we can get it done.’”

However, Foxworth-Galbraith is, like other businesses, scrapping around for lumber in the supply-and-demand market. “We’re doing everything we can to stay in stock. Pretty much, my management team spends all day trying to find product,” he said. “Whatever we can get we get, and we pay whatever we have to pay.”

In normal times, the price of lumber fluctuates depending on the season, but the COVID effect is going to linger longer on lumber, Olsen said. “If you want to build you should build because it’s not going to get any better,” he added.

Olsen figures that, in the time of COVID, the price of lumber might add around $25,000 to the construction package that would include a 30-year mortgage in the 2% range. “The equity in your home, as soon as you build it, has gone up by thousands,” he said. “So it’s a win-win situation.”

But if isn’t one thing it’s another. The freeze in Texas in February, for instance, had a snowball effect on prices. “That freeze shut down 168 petrochemical plants; that’s your oil,” Olsen said.

The plants in Texas supplied products such as glue for plywood and resin for plastics. “So manufacturers can’t get raw materials, can’t get packaging for the materials and can’t get enough truckers to ship them,” Olsen said. “That freeze in Texas is causing the backlog in a lot of materials. Up to this time, there are still 37 plants that haven’t reopened.”

In the meantime, Olsen looks at lumber prices through the lens of the futures market. “Everybody is looking at the future, where prices have gone down quite a bit,” he said. “But futures translate into … future. That means they are negotiating prices for the future.”

The futures market is a financial merry-go-round. “So we’re not going to see any price decreases for months,” Olsen said. “By the time those prices hit, prices are going to start going up again.”

At some point, suppliers are going to balk at the high prices. “So everybody is buying just what they need,” Olsen said. “And that has caused a little bit of a slowdown, so it’s like the stock market. When people stop buying the price comes down.”

Eventually, suppliers are going to run out of construction products. “So then everybody needs to jump in and buy at the same time. So prices will go back up because the demand has not gone away,” Olsen said.

During COVID’s “heyday,” lumber prices jumped 200%. “You’re not going to see overnight prices decrease by 200%. There’s a lot of speculation that prices are declining and everything is going to come down,” he said. “It’s not going to happen.”

Published at Tue, 29 Jun 2021 06:00:00 +0000