Despite Pricey Lumber, There's Still Demand to Build Homes in Nebraska

June 4, 2021, 6 a.m. ·

Cottonwood Veneer 4x4s from Barcel Mill & Lumber Co.
Even though cottonwood veneer from Barcel Mill & Lumber Co. is not used to build homes, it's still a little pricier than usual. (Photo by Will Bauer, Nebraska Public Media News)

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High price tags on newly built homes are not keeping many Nebraska customers away from construction, despite rising prices and shortages for both lumber and other construction materials.

Numbers may vary, but most home builders in Nebraska say the same thing: if you want a home built, it’s going to be much more today than before the pandemic.

Roger Brummels, a draftsman at Century Lumber Center in Norfolk, estimates the lumber portion of a house is now $40,000 more – and that's just the lumber. “Then there's other increases in all the other aspects also," he said. "Electrical, plumbing, heating, everything's increased on the cost of a home.”

Even with these sky-high lumber prices, home builders say there’s still a demand for projects because historically low interest rates and the value of owning a home are worth the large up-front cost for many people looking to build homes. The problem then lies in finding a contractor – someone to build the home – because the contractor, for the most part, will take the risk of prices moving even higher.

"There's houses on the market right now that don't last but a day or they're getting more than asking price for houses that are selling because the economy is very good right now," said Don Wisnieski, the president of the Nebraska State Home Builders Association. "And we're very thankful for that.”

Wisnieski is a contractor himself with his company Wisnieksi Corp. in Norfolk. In this seller's market, he's said he is currently nothing but busy.

Strong demand for houses in the Midwest has hiked prices. Right now, a home can be worth far more than what it was purchased for a few years back. Add in the low interest rates, the pandemic and what happened because of COVID-19, the demand was only made greater.

Wisnieksi worries about what kind of impact that has on the people he represents – the home builders. Many absorbed the increased cost of building the new home after lumber prices changed overnight, which has left some to be more reluctant to take a new job. A construction quote – which is the cost to build a home – used to be good for the entirety of a build. In the last few months, Wiesnieksi said quotes can change in 24 hours as the price of lumber mostly rose.

"It made it a heck of a challenge," he said. "It was tough.”

Those price changes sometimes can affect the consumer, too. But, overall, the customer building the house stands to win the long game with low interest rates, even though they are paying much more up front for their home, according to contractors.

“The interest rates are what really drove the decision to build and build now," said Kirby Cunningham, who recently built a home near Malcolm, Nebraska, which is about 10 miles northwest of Lincoln. "It’s really hard to beat those interest rates, and, even with the lumber cost changes, I think that low interest rates have just really been key to anyone that’s looking to build right now. It’s very reasonable.”

Cunningham was lucky, as he started the home designing process with Aspen Builders in Lincoln last summer before lumber prices really spiked.

The prices for lumber used to build homes, of course, comes from the commodity producers – just not any in Nebraska. For the most part, the state doesn't produce any grade lumber used for home building, according to Heather Norbert, a forest products specialist with the Nebraska Forestry Service.

For housing lumber, builders use conifer wood like Pine. Conifer production happens at mills in the southern U.S. and Appalachia region. Norbert said most of Nebraska’s largest lumber producers are very similar to Barcel Mill & Lumber Co. and the company's mostly cottonwood products. The mill sits about 8 miles south of Columbus near Bellwood, Nebraska. The sawmill uses cottonwood to build what industry experts call "dunnage." It's used to make products like shipping palettes. The sawmill and lumber producers also make veneer, a thin slice of wood, and, most recently, boards for axe throwing.

BJ Barcel Stands In His Sawmill Near Bellwood, Nebraska
BJ Barcel, owner and operator of Barcel Mill & Lumber Co., stands in one of his sawmills near Bellwood, Nebraska. (Photo by Will Bauer, Nebraska Public Media News)

"A lot of the people that we convert over to cottonwood, they were going down to Menards and Home Depot. And then when the price just went through the roof, well, they started looking for other things," said BJ Barcel, the owner and operator of Barcel Mill & Lumber Co. "It gave us an in to start selling them cottonwood. Now they don't want to go back because the cottonwood lasts so much longer. It takes that abuse so much better than the pine does."

The cottonwood isn't an exception for price hikes though. It's still pricier than usual – just not nearly as much as the lumber used to build homes.

Barcel estimates that a utility-grade conifer, which is typically a competing product to the cottonwood he produces, costed between $250-$300 per 1,000 board feet last year at this time. When he checked a week ago, the utility-grade conifer costed between $800-$900 per 1,000 board feet – a significant increase. His dunnage-grade cottonwood products range between $500-$560 per 1,000 board feet, he said.

Sales this year at Barcel Mill are up 50% compared to last year, but only 9% compared to 2019, which is a more normal year of sales, Barcel said. The prices have increased 9% from the beginning of the year, too. All that being said, Barcel said is he is reluctant to hike prices because his cottonwood that competes with the conifer is a much more attractive price right now.

The initial spike in conifer price can also be explained with simple economics, as most experts attribute the price change to an initial shortage in lumber supply during the early days of the COVID-19 pandemic, followed by an increase in demand by both the construction industry and bored DIYers who had more free time at home.

Don Wisnieski and Roger Brummels Discuss Lumber Prices at Century Lumber Center in Norfolk
Don Wisnieski (left) and Roger Brummels (right) discuss lumber prices in Brummels' office at Century Lumber Center in Norfolk on May 26, 2021. (Photo by Will Bauer, Nebraska Public Media News)

With all the change, that Wisnieski said has made most contractors re-think how they conduct everyday business, the Nebraska State Home Builders president wonders what change will look like and when it eventually returns to more normal conditions.

Brummels has been in the home building business for 40 years, and he’s only seen something like this once, in the 1980s when prices and interest rates went way up, he said.

“It typically takes a two to five year period to bring it back to normal pricing," he said. "But I personally think that you're going to see some strong adjustments in prices over the next 18 months. The pipeline of materials is starting to fill in, so we're starting to see inventory come quicker. When inventory is easier to access, the prices become more negotiable, and, so now we're starting to see more and more of that.”

Until then, home builders and consumers will still need to pay more for both the materials and construction.