Md. builders feel pinch of higher lumber costs

PAYING THE PRICE

October 02, 1992|By Ellen James Martin | Ellen James Martin,Staff Writer

More than a month after Hurricane Andrew devastated communities in southern Florida, Maryland lumber yards and homebuilders are still paying higher prices for plywood and other lumber products -- and wondering whether increased demand is the sole reason.

For example, a 4-by-8-foot sheet of plywood that is one-half inch thick sold for about $8.49 before the hurricane. Today, that plywood sells for $9.99, said Fred Grzeskiewicz Jr., Hechinger's wood products buyer.

At the same time, local home store retailers -- including Hechinger and Home Depot -- have begun rationing the sale of plywood to protect their regular customers' source of supply.

"People were trying to buy truckloads of plywood to take it to Florida," Mr. Grzeskiewicz said.

Although prices for some plywood at Hechinger have risen as much as 60 percent, he said it commands even higher prices in Florida.

Home Depot, meanwhile, reserves the right to limit plywood purchases on a case-by-case basis, said Jack Holshue, manager of the Glen Burnie outlet of the Atlanta-based chain.

"We're here to satisfy the home consumer. We don't want someone coming in and buying up 3,000 sheets," Mr. Holshue said.

Distributors, too, are reporting higher prices.

"It's incredible what's happened to lumber prices," said Lou Grasmick, chief executive officer of Grasmick Lumber Co. Inc. in Baltimore, which supplies both retail and wholesale customers.

Since the hurricane hit Aug. 24, the cost of plywood and other wood-related products from the supplier has soared 25 percent to 50 percent, Mr. Grasmick noted.

"We think the hurricane was just an excuse to escalate prices -- which have gotten totally out of hand. We've sent a wire of protest to the U.S. attorney general," he said.

But the lumber industry contends that a genuine shortage of product -- especially for the plywood used to rebuild roofs ripped off by Hurricane Andrew -- accounts for the steep rise in prices.

"This is strictly a supply-and-demand market mechanism. We don't think it's true that there's been an industry attempt to collude and set prices," said Jack Merry, a spokesman for the American Plywood Association, a trade group.

Meanwhile, the National Association of Home Builders in Washington has launched an investigation of the pricing practices of the lumber industry, said William Young, consumer affairs director of the trade group.

"We've heard of reports of rather sharp increases as far north as New England and as far west as California. But we don't want to point any fingers until we get sufficient documentation as to what is actually happening," Mr. Young said.

To determine where along the chain lumber prices have been raised, Mr. Young said the trade association was gathering invoices from a number of the homebuilders it represents.

No matter what the reason for higher lumber prices, Maryland's homebuilders must cope with the realities of higher prices. A builder who set a home price under contract before lumber costs soared cannot pass on the increase, Mr. Grasmick observed.

"Many builders and home improvement contractors are in a state of shock. They've budgeted X-amount for a project and now their costs have gone way up," he said.

And builders now negotiating new-home purchase agreements are wary about passing along the price increases for fear of losing market share.

"We're very, very cautious about raising prices," said Martin Hill, head of Masonry Contractors, based in the Manchester area of Carroll County.

Although the increase in lumber prices, which has particularly affected plywood products used in roof sheathing, flooring and walls, has added from $200 to $400 to the company's cost of building an average home, Masonry Contractors has decided not to pass the costs on.

But another local building firm, Landmark Homes based in Towson, has started passing on its higher costs to new customers.

"Our margins are as low as they can get. We're pretty much bare bones," said Michael Barrett, Landmark's vice president of operations.

Higher lumber costs are adding $500 to $1,000 to the price of an average home built by Landmark.

Still, some larger homebuilders have been scarcely affected by the climb in lumber prices. The Columbia-based Ryland Group, for instance, purchases lumber on long-term contracts typically ranging from eight to 12 months, said Nancy Smith, a spokeswoman.

How long high lumber prices will last is uncertain, but chances are they will begin to fall soon, predicted Sam Sherrill, a lumber expert and head of C.C. Crow Publications in Portland, Oregon, which put out trade publications for the forest products industry.

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