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With Lumber Prices Continuing To Increase, What Does This Mean For Florida Hard Money Lenders

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COVID-19 has had many disastrous effects on various sectors since its emergence last year. As of late, the lumber industry has been biting the pandemic’s bullet, with prices skyrocketing and the demand for lumber significantly increasing in the past year.


In this article, we investigate what these high prices mean for Florida hard money lenders.


Why Lumber Prices Have Increased

Fix and FlipBoth lumberyards and suppliers have struggled to keep up with demand. This is because, recently, more and more real estate investors, contractors and homeowners are endeavouring to renovate and expand their property portfolios. The sharp rise in lumber prices was brought on by intricate macroeconomic forces that were impacted by the COVID-19 pandemic.


Before the pandemic, the average price of 1000 board feet of lumber generally ranged between $250 to $400. However, since June 2020, prices have skyrocketed past $1,000. It is clear that the sharp increase in lumber prices coincides with the spreading of the coronavirus in Canada and the U.S.


Here are some of the main reasons why lumber prices have gone up in the past year.


Shorter supply due to COVID-19


The pandemic’s subsequent lockdown had devastating effects on the economy. It also put lots of financial strain on small companies. As a result, lots of these companies were forced to shut down or turn to hard money lenders. This is exactly what happened to various lumberyards across the country.


Borders closed in an effort to stop the spread of the virus. This caused a shorter supply of lumber to the general U.S. market. These efforts were necessary to keep everyone safe. However, the construction industry as a whole took a big hit and has not been able to catch up since then.


The closure of the US-Canadian border caused supplies of Canadian lumber to dwindle at a record-breaking low. This was quite problematic seeing as large amounts of wood used for local construction projects come from Canada.


Home improvements


Since the outbreak of the pandemic, people have had to stay home due to government mandates. This has caused a surge in home improvement projects, which requires a lot of lumber. Seeing as many lumberyards have closed down for a significant amount of time, the industry has been struggling to meet this high demand.


As a result, people have been experimenting with DIY projects to try and save money on higher lumber prices. A lot of people have also turned to private money lenders to finance their renovations. However, this has caused the real estate renovators, builders and the commercial construction industry to take a large hit. Out of all the parties involved, construction companies have suffered the most when it comes to rising lumber prices.


Demand for residential construction


The demand for residential housing has increased. Because of this, the demand for lumber has also skyrocketed. The Bureau of Labor Statistics data shows that the number of home construction employers has increased by 9,000.


When it comes to the prime location that all these renovations and property sales are taking place, the suburbs seem to be a hotspot.


This is largely due to these areas’ lower interest rates and the high demand for lower-density areas that accommodate social distancing. This is also primarily why the demand for lumber has increased .  .


Harder to get lumber

Wooden house model and calculatorThe logging industry hasn’t been the only industry that’s been hard hit by the pandemic. The pandemic has also made life hard for truckers in the trucking industry. In fact, the National Law Review reported a decrease in commercial transportation across the U.S. and Canada during 2020.


Wait times have also increased when it comes to pickups and deliveries. This, in turn, contributed to the increase in lumber prices seeing as it became more expensive to acquire lumber materials from lumberyards.


During 2020, a lot of contractors turned to private money lenders to complete construction projects and get their lumber in time.


Recovery and reconstruction after natural disasters


Hurricane Laura and the Western U.S. wildfires destroyed a lot of homes in their wake. With every natural disaster, the demand for lumber increases. This is largely due to the fact that the reconstruction of homes can take months. In addition, repairs require lots of materials, including lumber.


Coupled with the fact that the pandemic slows the adequate supply of lumber and also causes construction companies to work at a slower pace, reconstruction efforts could now take twice as long to complete.


How Does This Affect Florida Hard Money Lenders?


The effects of the pandemic won’t disappear overnight. So, builders, homebuyers, and renovators should take note that lumber prices might not stabilize anytime soon. However, this shouldn’t stop you from embarking on a new construction project.


Yes, increased demand and a lower supply of lumber will result in more expensive projects. However, working out your budget beforehand will allow you to realistically plan ahead before you start renovating. In reality, profit margins will be tighter for contractors as not all cost increases can be transferred to the final consumers.


For this reason, negotiating a deal with hard money lenders may be the perfect way to ensure the timely completion of new construction projects.


House buyers should also be aware that the housing market will become more expensive. In fact, house prices have already spiked by 13.2% in the past year. Houses are flying of the markets, often being bid above asking price.  Because of this, hard money lenders will be more cautious when evaluating your budget won’t consider future potential appreciation (otherwise known as speculation). But, this will not stop them from financing investment loans with sound profit margins built into your real estate deal.


Final Thoughts


If you are looking to embark on a new renovation project, want to buy property, or are struggling to make ends meet as a contractor, you don’t have to worry about having all of your finances liquid. Yes, lumber prices have spiked in the last year, but by getting a quick fast loan from a private money lender, you can better manage your budget and finances to make your next real estate project more profitable!


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