Tough for builders to stick to estimates when cost can double in months
Michael McCullough
Sun
Wildly fluctuating prices for wood panel are creating trouble for home builders and buyers — and forcing some to try creative solutions.
The wholesale price for oriented strand board (OSB), the most common panel in residential construction, rose to $15 US from $6 per sheet between May and September last year, the U.S. National Association of Home Builders reported in a briefing letter released last month. The price collapsed to $7 US in December, but has since rebounded to $15 again — extraordinary for mid-winter.
“The volatility and tightening supplies of plywood and OSB have continued to be a significant problem for many builders, defying attempts to estimate final project costs, schedules and profits,” the NAHB said.
In B.C., the same four-by-eight-foot sheet that sold for $8 (Cdn) a year ago now costs $22.
Local builders, who enjoy a 12-month outdoor building season, worry the price could spike still higher once the building season restarts in the American Midwest and Northeast, and the rest of Canada in April. Building supply prices typically peak every year between May and July.
It’s becoming hard for builders to stick to their estimates when the price can double in a matter of months, before a house is finished.
“We start a project, we tell people it’s going to be around a certain price and I want to be able to keep that,” said Brad Hughes, who owns Park Ridge Homes in Surrey.
Hughes bought a six-month supply of OSB and plywood when the market took a dive in December, but most builders could not afford to do that even if they had the foresight, he said.
“I know I’m going to be framing 30 houses between now and July, so we committed to buy it at a certain price,” he said.
“People are costing out their jobs and there’s no assurance that the prices will be there or will be the same,” said Peter Simpson, executive vice-president and chief operating officer of the Greater Vancouver Home Builders Association. “It’s a concern for us of course because the market is fairly buoyant for us right now.”
The OSB sector is operating at full capacity and will see no more than two per cent growth in production this year, the Washington, D.C.-based NAHB said.
“The key problem seems to be that demand is exceeding capacity, prompting some panic buying and speculative inventory swings that only exacerbate the issue,” the association newsletter said.
The situation is not much different for plywood, which years ago was displaced by the cheaper-to-make composite panel for most household applications.
“Right now OSB is [at a] higher price than plywood, so builders are switching to plywood,” said Chris Coakley, general manager of Port Coquitlam Building Supplies. However, the production capacity for plywood is even more constrained than OSB, so its price will likely shoot past OSB’s in short order.
The $14 increase in the price of a panel in the past year adds around $2,800-$3,500 to the price of a 3,000-square-foot house, Coakley said. But the way things are going it may become less a problem of price and more one of availability. Some building projects could be delayed as builders wait for their orders to be filled.
Coakley has started to examine alternative materials. The first one B.C. builders will consider are one-by-10-inch boards, “what used to be called shiplap,” he said. The trouble with shiplap is it takes more time to install and raises labour costs.
“The framers, they have to nail each board up individually, whereas they can cover 32 square feet at a time with plywood,” he explained.
Coakley is also considering carrying other composite wood and polystyrene panels that have come on the market. Unfortunately, these too come in smaller sizes that hike the labour component.
“The industry has been forced to look at alternatives because of cost and supply,” Simpson said.
Hughes believes cost increases above the rate of inflation will further raise the cost of new homes — which will ultimately dampen demand and let some air out of the current building bubble.
“It’s already enough pressure with the drywall and other things. From the municipality’s building permit fees right to the final cleaning contractors, everybody’s going up a little bit and it’s pushing affordability.”
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LIST OF ALTERNATIVE MATERIALS TO STRUCTURAL PLYWOOD AND OSB
Concerned about the price and availability of structural plywood and oriented strand board, the U.S. National Association of Home Builders’ research centre in Washington, D.C. provided members with a list of alternative materials. (Prices are in U.S. dollars):
– Impregnated fibreboard, aka blackboard, greyboard or buffaloboard. Made of: wood, other plant and/or recycled fibres, binding agents. Currently used for: wall sheathing and floor underlays. Upside: cheap. Downside: not as strong as OSB. Cost per 4X8′ sheet: $4.73.
– Cementitious board. Made of: Portland cement reinforced with fibreglass mesh. Currently used for: backerboard for ceramic tile. Upside: has been used for exterior sheathing under stucco. Downside: not structural, needs corner bracing. Cost per 3X5′ sheet: $15.
– Fiber cement. Made of: wood fibre and cement. Currently used for: siding, sheathing and cladding. Upside: available untextured or textured. Downside: high cost, local building codes may require corner bracing. Cost per 4X8′ sheet: $25.
– Exterior gypsum. Made of: gypsum with paper, glass, cellulose or perlite. Currently used for: backing for stucco or brick veneer. Upside: fire resistant. Downside: requires careful handling. Cost per 4X8′ sheet: $15.68.
– Foil or paper faced insulative board. Made of: various materials. Currently used for: sheathing. Upside: comes in large sheets, does not require corner bracing. Downside: paper faces should not be exposed to moisture. Cost per 4X8′ sheet: $9.
– Foam sheathing. Made of: extruded polystyrene, expanded polystyrene or polyisocyanurate. Currently used for: insulation. Upside: comes in all sizes and thicknesses, most insulative of all sheathing options. Downside: not structural, requires bracing. Cost: $9-10.60.
– Wood boards. Made of: wood. Currently used for: restoration, selected uses. Upside: heritage look. Downside: high cost, labourious to install, inconsistent strength. Cost: varies.
– Imported OSB and plywood (from Brazil, Chile, Europe). Made of: wood fibre, resin. Currently used for: siding, sheathing and cladding. Upside: strength, durability. Downside: “Due to shipping costs and the commodity nature of wood structural panels, prices may mirror or exceed domestic panel prices.”
© The Vancouver Sun 2004