2023 is here. What will that mean for the Deck Business? Here is why we believe that though the budget for decks is higher — it is not likely to ever be cheaper.
Lumber Prices are Collapsing
That means after watching the lumber price triple over the past 3 years, it is back down to normal levels.
Lumber futures topped out at about $1700 per 1000 board feet from about $350/1000 prior to the pandemic. Here we are at the lows once again for lumber.
Keep in mind that as lumber prices fall, that typically means less lumber is being used, (which makes it cheaper), so, lumber yards are sitting on lumber that they may have bought near the peak. We have just seen our first major decline in prices for lumber from the yards. There will likely be more coming up—
This whole lumber system is like a pendulum swinging. Prices for lumber get low–too low, so they mill less to create a shortage, thus, driving the prices up and causing shortages. Lumber producers typically miss the mark and run it up too high, causing another downturn in price, etc.
Mill curtailments have already happened, so, we should expect prices to go back up towards the fall. More on predictions later.
Why have prices come down so quickly? A combination of production increases while prices were high, interest rate rise, and credit market tightening. Inflation is another factor and it’s mainly affordability at this point. Not as many can afford to build.
Lingering Effects of Deck Materials Inflation
Due to the speedy rate of lumber price increases many builders failed. If they held their prices they lost profits. If they increased the prices accordingly, many jobs were canceled. We found that we had to adjust our fees for every single job during 2021 and 2022.
There is still a shortage of good deck builders— that means most that are still in business are booked out for many months.
Why Such a Wide Range of Prices Among Bids?
Most people intending to build a deck call up a few companies to talk about the deck they would like to build. Most don’t have any idea of the kind of deck they want to build nor what the budget should be. They don’t have their own plan with specifications so all the builders they speak with will assign different specifications.
Some plan to build with the cheapest lumber they can find and do the bare minimum to get as close to code as possible without overdoing it.
Other builders have high standards, pay more for a better grade and use more lumber, (larger beams and joists), tape the beams and joists, and use upgraded PVC products like Azek. (the most expensive brand).
Results will vary dramatically. A deck built by actual Carpenters vs Handymen, using the best materials may look much the same after 10 years of use.
Perils Related to Low Bid
Every year there are a few hundred new deck companies in Southern Ontario.
Every year, most fail by August. Believe it or not, very few deck builders have an MBA. Accounting is not their strong suit. They may not understand that without profit and overhead covered in their pricing strategy, they will be out of business in a flash. Unexpected events happen, and, it happens every year.
The skill levels among these new deck builders vary, however, when they close up shop, suppliers often get left out to dry. If it is the material supplier or subcontractors, you could end up with a lien on your property when they don’t get paid–even if you paid the contractor in full.
What I am trying to suggest gently is– there is risk involved in accepting a bid that common sense says is too low when compared to multiple bids.
Composite Pricing is UP!
Lumber may have dropped, however, most of the composite companies have nearly doubled their prices in the past 3 years.
Hardware and fasteners are also more expensive– Helicals are expensive as well.
Most of the inputs for composite, plastic, PVC, rice hull, are sourced overseas. That became much more expensive during the pandemic. A shipping container from China pre-pandemic was $4,000 USD. As you can see below that ballooned about 500% during the pandemic and lingered at the heights.
Trucking also became difficult with the price of fuel and manpower elevating the costs on that end as well. These costs have come off in the US, so, expect those prices to come back down somewhat.
Future Expectations for Decking Project Budgets
Canada has its own spiraling inflation problem.
We are currently enduring inflation running at about 10-15% here. There is controversy about what the actual number is, however, Shadowstats does a good job of estimating the real number. The government has changed the way inflation is calculated in order to keep perceived inflation down. For our purposes, we need a realistic number.
What does this mean? EVERYTHING is getting more expensive as time goes on. Decks have about doubled in price in the past 10 years, as have Cars, Food and Fuel, Composite Decking, Rent, and Houses… Strangely though, our hourly pay has not. I suspect that it will, however… It has to.
What is causing this inflation? That is a debate for another time, however, the major causes that we deal with in Canada are the ever-increasing taxes and burdensome bureaucracy we deal with daily.
Doing business in Canada is expensive.
Inflation is showing signs of slowing, however, our cost of living will never get back to what it was 5 years ago. Our government is doing nothing to ease inflation, so, we expect that to continue. Our labor shortage in the trades is actually getting worse.
The cost of vehicles, fuel, employees, and insurance is increasing at a rate far surpassing inflation, therefore I would expect the prices of decks to continue its rise over the next few years, likely faster than inflation.
Will decks get cheaper in the future relative to your income? No. The costs associated with building are growing faster than inflation and the labor shortage shows no signs of relief.