Editor’s Note: This is the third in a series of articles on real estate in Teller County. The first talked about high house prices in addition to the lack of inventory. In the second, the District Assessor talked about the rising cost of housing. This article looks at the cost of materials like lumber for those looking to start from scratch.
In the Teller County real estate market, home prices have skyrocketed over the past year, and the bidding war has drawn winners and losers. At the same time, stimulus money from the federal government sparked the market for new home construction or improvement of old ones.
The shutdown, which began in mid-March 2020 due to the coronavirus, has affected almost the entire real estate market.
“During COVID, we were fortunate enough to be one of those businesses that needed building materials,” said Jim Olsen, CEO of Foxworth-Galbraith Lumber Co. in Woodland Park. “We thought we needed to cut staff, that everything would be closed, so we revised our budget like everyone else.”
Rather than losing business, Foxworth Galbraith has become one of the busiest places in the city. “People had incentive money, so everyone was doing home renovations because they needed to teach their children at home,” he said. “So they turned the bedroom into an office, did all sorts of renovations to the house – whatever you could think of. And that created a supply and demand problem. “
As a result, lumber has become a popular commodity. “There is not enough product, but all kinds of people want it. So this is what drives prices up. “
The ripple effects of the scarcity affected the delivery of goods because trucking companies laid off drivers during the pandemic. “When we got out of the grip, everyone needed truckers,” Olsen said.
All supply chains have been affected by the closure of manufacturing and construction-related industries, as well as the layoffs of employees.
“We’re just trying to move everything so that the business continues and the builders build,” Olsen said. “But now it’s so hard to find a job. This shortage simply continues to exacerbate the problems. ”
But business is booming. While some residents are improving their homes, others bring architectural plans to the store. “People want to build houses, and the price of the product doesn’t stop them,” Olsen said. “Because they want what they want. They say, “Just do it so we can do it.”
However, Foxworth-Galbraith, like other businesses, sells lumber in the supply and demand market. “We do our best to stay in stock. Basically, my management team spends all day trying to find a product, ”he said. “We get what we can and we pay what we owe.”
During normal times, the price of lumber fluctuates with the seasons, but the impact of COVID on lumber will last longer, Olsen said. “If you want to build, you have to build because it won’t get any better,” he added.
Olsen calculated that during COVID, the price of lumber could add about $ 25,000 to a building package that would include a 30-year mortgage in the 2% range. “The share of your home has grown by thousands as soon as you build it,” he said. “So this is a win-win situation.”
But if not one thing, then another. For example, the freeze in Texas in February had a snowball effect on prices. “This freeze stopped 168 petrochemical plants; this is your oil, ”Olsen said.
Factories in Texas supplied products such as glue for plywood and resins for plastics. “So manufacturers can’t get the raw materials, they can’t get the packaging for the materials, and they can’t find enough trucks to ship them,” Olsen said. “This freeze in Texas has delayed the release of a lot of material. To date, 37 factories have not yet opened. “
Olsen, meanwhile, looks at lumber prices through the prism of the futures market. “Everyone is looking to the future, where prices have dropped slightly,” he said. “But the future means … the future. This means that they are discussing prices for the future. “
The futures market is a financial carousel. “Therefore, we will not see a decline in prices for several months,” Olsen said. “By the time these prices are reached, prices will start to rise again.”
At some point, suppliers will give up high prices. “So everyone is buying exactly what they want,” Olsen said. “And it caused a slight slowdown, so it looks like the stock market. When people stop buying, the price goes down. “
Eventually, suppliers will run out of construction products. “So everyone needs to connect and buy at the same time. So prices will rise again because demand is still there, ”Olsen said.
During the heyday of COVID, lumber prices jumped 200%. “You won’t see a 200% drop in prices overnight. There is a lot of speculation that prices will fall and everyone will fall, ”he said. “That will not happen”.