Lumber futures are falling after sudden rise. Will this jump-start Orlando construction?
By Jack Witthaus – Staff Writer, Orlando Business Journal
Jun 21, 2021 Updated Jun 21, 2021, 11:00am EDT
Prices of lumber — an essential building material for Central Florida residential projects — finally are falling.
But experts say don’t expect paused construction to bounce back immediately.
Lumber futures dropped 45% from their May 7 high after skyrocketing in early 2021, which led to some developers pressing pause or shelving work due to the costly material jump, according to Nasdaq.com. Still, prices remain roughly three times higher than what is typical this time of year, according to the Wall Street Journal.
On top of that, even with the price drops, it still may take developers and contractors months to secure wood reflecting futures prices, said Jason Albu, who owns Winter Park-based general contracting firm Albu & Associates Inc. Albu’s company mostly works with concrete and steel, so it has been insulated from the wood price shocks. However, Albu has been in talks with other contractors feeling the pain locally.
Plus, costs for labor and some other materials outside lumber remain high, which also is threatening project construction, Albu said. In general, a new project may cost 20% more now versus this time last year.
“We get calls from owners who are shocked when we put bids in,” Albu said.
Still, projects tending to move forward in Central Florida are owner-user construction, Albu said. However, projects built speculatively are suffering due to material and labor costs.
With labor and material costs remaining high, it may seem like the construction industry as a whole would suffer uniformly. However, local and national figures show a different story. Construction starts for Central Florida’s residential and nonresidential building between January-April were up 10% year-over-year to $2.97 billion, according to the most recent New York-based Dodge Data & Analytics report.
Nationally, nonresidential construction backlog continues to increase, a positive sign for the construction industry, according to a Washington D.C.-based Associated Builders & Contractors Inc. June 15 report. That’s despite materials and labor costs rising across the nation.
“One might think this would suppress profit margin growth,” ABC chief economist Anirban Basu said in a prepared statement. “Apparently, demand for construction services is strong enough to generate sufficient pricing power to more than fully countervail those factors.”