Eye On Housing
Framing lumber prices garnered more attention than any other building material over the past year as prices quadrupled between April 2020 and May 2021. But even as lumber prices decline, the spotlight on lumber continues to crowd out the story of meteoric price increases of another wood product integral to the integrity of a building’s structure—oriented strand board (OSB).
The price of OSB has increased 510% since January 2020, exceeding the peak price increase in lumber by nearly 180 percentage points. Although plywood panel prices have substantially increased over the past 18 months as well, the increases have been less than half those seen in the OSB market. In addition to elevated prices, acute shortages have plagued the residential construction industry–particularly after the severe winter weather experienced in the south in February.
Prices and price fluctuations vary depending on use and location, with increases since the start of 2020 exceeding 650% for some OSB products.
Oriented strand board accounts for the most wood product used in structural panel applications in new construction. For example, OSB accounted for roughly two-thirds of wood panels used in wall sheathing in 2019.[1] Depending on the location of a build, the thickness of OSB sheathing in wall applications is generally 3/8” or 7/16” (with some use of 15/32”). The mill prices of these dimensions (shown below) have climbed an average of 491% since January 2020.[2] The “delivered” price of 3/8” thick OSB sheathing in Portland, Oregon has climbed an incredible 662% over the same period.
Oriented strand board is heavily relied upon in roofing applications as well. Roof sheathing made of OSB made up nearly two-thirds of all roof sheathing in 2019.[3] As roof sheathing is intended to resist “racking” resulting from high winds or earthquakes as well as carry gravity loads of items such as snow, finish roofing, and people, OSB sheathing used in roofing is typically 7/16” and 15/32” thick. In areas with minimal snow loads, building codes may allow for the use of 3/8” OSB.
In flooring applications, OSB may be used in a single-layer floor system as a combination subfloor and underlayment and is commonly available with tongue-and-groove (T&G) edges designed to prevent uneven wear. The most common wood structural panel installed in typical floor applications is 23/32” thick (installed at 24 inches on center). In the western United States, the “delivered” price of 23/32” T&G OSB has increased by 309%, 357%, and 432% in Phoenix, Denver, and Seattle, respectively.[4]
As lumber prices recede, more attention must be given to the stratospheric price level of OSB. The large share of OSB structural panels usage in new construction and the fact that, like framing lumber, it is integral to the completion of most residential construction should lead the market to shine a greater spotlight on OSB prices and scarcity.
[1] Builder Practices Survey data; NAHB calculations.
[2] Random Lengths; NAHB calculations.
[3] Builder Practices Survey.
[4] Random Lengths; NAHB calculations.
When inflation in building materials or construction labor exceed general inflation, it often grabs a headline (as it should). But this obscures the fact that the high price of housing in the USA is NOT a function of high labor or material costs.
In rust-belt cities, large houses can be acquired for between $30,000 and $60,000. Yet, if you’re unemployed, even a “cheap” house can be unaffordable. And, in Silicon Valley where couples often make six-figure incomes, these couples find it difficult to find decent affordable housing. And it’s NOT because the price of lumber, or plumbing or labor is that much more expensive in California than in a rust-belt city. It’s the price of land that is driving housing prices through the roof.
Unfortunately, our tax system encourages land speculation — a parasitic activity that produces nothing of value, but which creates significant increases in land prices. I hope that NAHB and others will pay attention to policies that some communities have used successfully to curb land speculation and thereby tame land price inflation.
There is no doubt that land is the biggest cost factor in building a home, but I disagree as a Homebuilder that the raising costs in the marketplace has not been largely effected by the increased cost of labor and materials. We have had to increase our prices from 70K to 100k to cover these increases. The other major factor that effects both the cost of land and the building of a home are regulatory costs. This could vary by state but over 25% of the total cost is dur to these requirements. The current administration needs to get the workforce back to work, work with our industry to correct the supply chain, work to reduce the regulatory burden, and stop making moves such as saying it is going to double the tariffs on lumber from Canada lumber. All of these things that they control are the major factors to affordable housing in this country.
You nailed Philip!!! I’m a homebuilder of 39 years. I see the current state of affairs exactly as you put it. While there are a lot of good people working in the departments controling development and building in our cities and counties, this unending trend toward more regulation hasn’t changed much in the end product to the consumer, it just costs a whole lot more to produce and has severely restricted supply. I do not see land speculation tax benefits as a factor in the building lot shortage. I’m also a land speculator and I’m actually not aware of any tax benefits, other than capitol gains tax and that only requires an investor to hold for a period of one year. I can’t see how that has negative consequences, only positive, as it encourages investment, which results in more building lots.
Expand growth management boundaries, build more roads so people can get from affordable housing locations to the work place and deregulate residential land development, then and only then, will the price of building lots will come down!!!
The tariffs placed on Canada is to keep things even for the American logger and saw mill industry canda was dumping wood into america cheaper then we could log it for dam near. And that’s because their government gives the mills or the logging outfit the wood for nothing if not subsidizing them to log it. Making it impossible for our industry to keep it’s head above water. The tariffs are a good thing in the long run unless you want all American mills to shut down and then canda will ask whatever the hell they want for wood. Think about it. Once a mill is shut down it never reopens in this country be a team player. We are all in this together and we need to help each other out. God bless the American working class
Great report, thank you for posting. I’ve been waiting for wood materials prices to drop so I can start my renovation for my home.
Yes I finally got a loan to fix my garage roof and then wood prices sky rocket, so another year of tarping on my garage roof is inevitable, I’ll keep tarping it forever before I would pay unreal prices for lumber.
All of these things mentioned have an adverse effect on the value of things. I have spent a 30 year career in the wholesale lumber business. I can tell you that #1 there is no shortage of raw material! #2 There is no shortage of people to build homes! There is a generation of lazy people, who do not want to work, creating the shortage of labor! The lumber , and plywood mills will create a market, by playing games, creating synthetic order files, to raise prices!There are wholesalers involved, that take giant positions in the market that create price increases, or decreases. The lumber cartel will use any disaster, or virus, endangered, species of animal to create a shortage.The answer to high prices is that Covid will wear off, and things will return to normal! If you have a project to do , like I do , put it on hold, and save your money. If you have to borrow money, put an inflation factor in , to cover an increase in cost., if you have to build now. In other words, now is a good time to short the market in the next few months. The main thing is relax, and do not get caught up in the hype!
Perhaps it’s high time to explore other options. I am told by people I trust that OSB prices have nothing to do with supply, as there is plenty to go around. It’s all profit-taking by very poorly run companies, especially in Northern Minnesota. Some of these firms were on the brink of bankruptcy in recent years. OSB is garbage and every decent contractor knows it. It lacks horizontal structural rigidity compared to 1/2″ exterior plywood. It’s exposure time is limited. And, god forbid, if there is a leak, minor or major, OSB is a sponge and structural integrity is compromised within days. The product will literally turn to molded powder within months. Unfortunately, OSB prices are pushing up plywood costs, as well. One can hardly blame the plywood manufacturers. I, personally, will ONLY put 1/2″ plywood on a roof. For economic reasons I relent and use OSB for sidewall sheathing, but I don’t really care for it there either. And I realize that if a house is constructed “right” leaks should not be a concern. However, with so many components of homes subcontracted to, literally, dozens of different firms, mistakes happen. I have seen one too many major structural repairs needed because of a relatively minor leak caused by poor flashing, etc. and OSB is almost always the catalyst that turns a simple screw-up into a Defcon-1 disaster. I think it’s time for some new innovations to occur so we can stop putting this crap on our buildings.
Reach out to the APA-The Engineered Wood Association, the can give you the facts as they represent both OSB and Plywood. Much of what you have stated is simply not true.