Long Island builders contend with renewed surge in lumber prices

A resurgence in the price of lumber is driving up construction costs on Long Island and throwing a wrench into builders’ budgets for upcoming projects.

From Nov. 15 to Dec. 16, the price of lumber more than doubled to $1,119.10 from $536 per thousand board feet on the Chicago Mercantile Exchange. The price for prompt delivery then fell 2% to $1,097.40 as of 4 p.m. on Dec. 27.

The spike in prices was the latest example of volatility in the futures market after lumber prices neared $1,700 per thousand board feet in May before plunging below $500 in August. The instability has made it difficult to predict lumber costs for single-family and multifamily construction, local builders said, and contractors have been hesitant to commit to estimates for a project out of fear costs will rise.

"That’s the difficulty builders are finding with regard to lumber contracts," said Mitchell Pally, CEO of the Long Island Builders Institute in Hauppauge. "It’s making it very difficult for the lumberyards and the builder to come to some kind of understanding of what the price is going to be at some point in the future when the lumber is actually available to be delivered."

Pally said it is concerning that, as prices have fluctuated throughout the year, they have never consistently returned to a cheaper level. Lumber had traded at a range of around $250 to $600 per thousand board feet over the five years preceding the start of the pandemic. The higher lumber prices could add tens of thousands to the cost of building a home on Long Island.

"That may not be significant if the house is worth $4 million or $5 million, but it’s very significant if you’re trying to build affordable housing on Long Island in the $300,000-to-$400,000 range," Pally said.

Spot sales, or sales of lumber intended for immediate delivery, have risen in recent weeks as well, with the Random Lengths Framing Lumber Composite index, a pricing report published by Fastmarkets, reaching $985 per thousand board feet for the week ending Dec. 23, which is up 67% from $590 for the week ending Nov. 18 . The index is a composite of the prices of 15 types of framing lumber, which vary in length and by source.

Artie Cipoletti, CEO of DaVinci Construction in West Islip, who acts as a framing contractor for multifamily and single-family development projects, said he’s not able to give firm price estimates to clients because of the rapidly changing prices.

"There’s no way to predict where the lumber [price] is going to be, and you can’t lock in the pricing," Cipoletti said. Committing to a price when the cost of lumber is the highest it has been in months could bust developers’ budgets, he said.

A number of factors combined to drive up the price of lumber this month. Severe floods in British Columbia, Canada, last month disrupted transport routes in a key lumber-producing region and unseasonably warm weather in some parts of the U.S. increased demand, said Dustin Jalbert, a senior economist at Fastmarkets, which tracks commodity prices. Low interest rates have also helped spur construction and home renovations.

"We’ve had pretty good weather, so for builders it’s been a longer building season with not as much precipitation and warmer conditions around the country," Jalbert said. "We have a ton of homes that have been sold but not started. There’s a huge backlog that builders need to address, so they’re building deeper into the winter months while they can."

Local builders also pointed to the Biden administration’s recent decision to double tariffs on Canadian softwood lumber producers as increasing costs. The U.S. Commerce Department on Nov. 24 increased "antidumping and countervailing duties" on those Canadian imports to 17.99% from 8.99% with the goal of protecting American lumber producers.

"In the wake of the biggest lumber crisis we’ve seen, the decision was made to double tariffs. That to me was staggering," said Anthony Bartone, a managing partner of developer Terwilliger and Bartone Properties in Farmingdale.

The rise in lumber prices was poorly timed for Bartone, whose firm plans to begin construction on a luxury rental development, The Cornerstone at Westbury, next month. Bartone said increases in the cost of building materials, including lumber, steel and gypsum board, have added $2 million to price of the project, with lumber making up the largest share of that increase.

The project, which he now expects to cost $49 million , will add 131 luxury apartments near the Westbury train station. The developer has received village approvals for 72 apartments, which it plans to start work on in late January, and a second phase, which is pending approval, would add 59 more.

Unpredictable prices have made it harder to complete projects that often have an 18-month timeline and the higher price of softwood lumber will affect costs beyond framing, including finished woodwork, such as molding and cabinets, Bartone said.

"There’s always a push to do more attainable rental housing, but with taxes, land costs and commodity costs, it keeps compounding and makes it more difficult for these units to be attainable for our workforce," Bartone said.

Jalbert, the analyst tracking the lumber market, said he expects prices to fall in the next few weeks. He said contractors shouldn’t expect stable lumber costs anytime soon with everything from the effects of the pandemic to the mountain pine beetle destroying trees in British Columbia contributing to topsy-turvy pricing.

"The next to two to three years the trend will probably be downward, but it’s still going to be very, very volatile," Jalbert said. "You’re going to have these big jumps and collapses in prices."

By Jonathan LaMantia

jonathan.lamantia@newsday.com@jonlamantia

Jonathan LaMantia covers residential real estate and other business news on Long Island. He previously covered the business of health care for Crain's New York Business.