When it comes to home sales, there has never been a time like this when the demand for lumber to build new homes was so high and the supply was so low that it is driving home prices up in El Paso and everywhere else.
“The market has never been like this,” said Randy Bowling, president of El Paso-based Tropicana Homes. “I have enough houses under contract or what we can produce, and I’m not taking any more orders because it’s hard to get them built.
“It’s hard to get materials, and then the prices are so high.”
But the fact that Tropicana isn’t taking more orders doesn’t mean they’re not busy.
“We have about 220 new houses under construction right now,” Bowling said. “They’re all under contract, and there’s a waiting list.”
One of the reasons for soaring home prices is lumber, or rather the shortage of lumber.
That’s because, with the onset of COVID-19, lumber mills in the Northwest United States and Canada closed and have yet to resume full operations.
“I’m not in the lumber business, but what I’m told is there’s not a shortage of timber,” Bowling said. “There is a shortage of lumber because there’s a shortage of people working at the sawmills, which affects the supply chain.”
But up in the timber and sawmills country, there’s not a lot of incentive to hurry back to work and ramp up lumber production, said Hector Azurmendi, the owner of El Paso Lumber and general manager of Century International Lumber and Plywood, headquartered in Canada.
“If I produce 50% of my capacity and I make a 500% profit, I think I prefer to sit there forever, right?” he said. “That is, if I produce 100% of my production and make a 5% margin instead, why should I increase production?”
The situation has affected the business he started in 2001, El Paso Lumber, and required that he work with and for Century International.
“Thank God I represent a company that doesn’t have any problems with cash flow or anything,” he said.
Now, if he orders a shipment of 115,000 board feet of lumber, he has to pay for it in 10 days, though it won’t arrive for a month, and today’s price is $170,000.
“That’s against $55,000 in April of last year,” Azurmendi said.
When the COVID-19 pandemic hit, he said, supply companies like his started selling off their lumberyard inventories because everyone thought the market would slow down.
“So the price is going to drop, and I’m going to be able to buy cheaper in the next two months, right?” Azurmendi said.
Prices dropped initially, but then demand took off and so did prices.
“On some items, the increase was more than 300% breaking all the records,” he said.
So, when might construction supplies, including lumber, return to where they…
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