How to reduce renovation costs when wood prices are high
Wood costs have skyrocketed over the past year, leaving would-be home renovators to choose between waiting in price purgatory or going ahead and possibly paying too much.
Sawmills wrongly predicted that the housing market would collapse under the weight of the pandemic rather than grow as it did, says David Logan, senior economist at the National Association of Home Builders.
This ‘fatal error’, as Logan calls it, led to a mismatch between supply and demand which in May of this year had quadrupled the cost of lumber from sawmills compared to April 2020, according to data from Fastmarkets Random Lengths, a trade publication on the wood products industry.
In mid-July, lumber prices fell to only double their spring 2020 levels, but it is not yet clear whether the decline will continue and when the price decline will reach homeowners, said. Logan.
Here are tips for navigating a home improvement when the cost of lumber exceeds the roof.
MAKE ROOM FOR VARIABILITY
The recent drop in prices may seem like a positive sign, but Logan compares a renovator’s dilemma to that of a buyer: You don’t know when the time is right.
“Trying to time the market is likely to cause more angst than being sure you’re getting things done,” he says.
Logan says if he remodeled, he would do a big remodel, like upgrading the kitchen or adding a room.
If a project requires months of planning and waiting, plan for price and schedule changes in your contract, says Ethan Landis, director at Landis Architects / Builders in Washington, DC. This way you won’t be paying too much if prices drop before your contractor starts buying, but you can still delay if the project is too expensive.
SEARCH FOR ALTERNATIVES, PLAN THE PRACTICE
If a little DIY or an update from good to big could wait a few months, Logan says he would take the bet and wait for wood to become more affordable.
“Knowing full well that the prices could be higher by the time I do,” he said.
In the meantime, look for recycled, salvaged or alternative materials.
He estimates that using pallets instead of the high priced two-by-four reduced the cost of the project from $ 1,000 to about $ 100.
If you don’t have access to additional unclaimed wood, you can purchase it.
The Habitat for Humanity ReStore has over 900 locations, many of which sell recycled wood or wood items that you can rehabilitate or convert into something like shelving. Some locations allow you to browse their inventory online.
Your local lumber or flooring liquidator may have enough lumber to redo the flooring in a small room or on a single story in your home, says Rebekah Hernandez, a Dallas-based interior designer.
“You can’t be picky because there aren’t a lot of options, but they do exist,” she says.
PUT AFFORDABILITY FIRST
If you choose to delay the project to wait for lower prices or to save money, Hernandez says small changes like a new rug, throw pillows, and updated artwork may be enough for now.
“All of these things, although they are subtle and minor changes, they ultimately help make you feel happier and better in your space,” she says.
The outlay is still the cheapest way to pay for a renovation. But only fund the project if you can get a low interest rate and affordable monthly payments, says Larry Pershing, a Chicago-based certified financial planner.
Pershing says home equity lines of credit have low rates and you can draw on the money typically over a 10-year period. This means you can borrow as much as you need up to your limit when you need it if a large project has unpredictable costs and deadlines.
An FHA 203 (k) loan allows homebuyers to combine the costs of a top renovator and renovations into one mortgage. Pershing recommends them to homebuyers who don’t yet have a lot of equity.
A home improvement loan will quickly provide funds for the project, and you can often pre-qualify to estimate your monthly payments and interest costs.
With a lump sum financing option like a personal loan, try to have an end price in mind. If wood prices go up, you can’t go back and borrow again.
NerdWallet: How Home Improvement Loans Work https://bit.ly/nerdwallet-improvement-loans
Habitat for Humanity ReStores https://www.habitat.org/restores