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Michael Dishberger uses one word to describe the increase in the cost of lumber: “Astronomical.”
Houston is the home of a number of architectural landmarks, but the skyrocketing increase in lumber prices is nothing to brag about. Dishberger, co-owner and CEO of Sandcastle Homes Inc., has been in the industry for 38 years and has never seen anything like this.
“It’s up two-and-a-half times,” he told Houston Daily. “Let's say you had a lumber of package. It was $20,000 in the last year. At this time, it's now $50,000.”
Michael Dishberger
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Dishberger’s company builds around 50 homes in and around Houston a year, with prices ranging from $400,000 to nearly $600,000.
To provide an example of the massive increase, he said a sheet of plywood, used in virtually every home, cost $6 at Home Depot before the COVID-19 pandemic.
“Today I'm paying $46. Yes, $46 for a piece of plywood,” Dishberger said. “It's gold. There are people paying more than that. There's some people who are paying a little less. But that's where pretty much I'm hearing in the 40s from everybody, 40s and 50s for one piece of plywood because they can't make enough, because [of] what happened last year, they just shut them down.
“They shut all the plants. And we have plywood mills in East Texas, a 2-hour drive from Houston. You're in the middle of a lumber country where there's pine trees like crazy.”
Dishberger said when the price of lumber started to spiral up last spring, most people in the industry thought it was temporary, as mills and factories shut down or reduced production due to concerns about workers being too close together.
“We all thought, ‘OK, this is temporary. You're going to get the factories back,’” he said. “Working again, they will be producing lots of lumber. And the price did drop around November.”
But then it went back up and “it keeps going up every single week,” Dishberger said.
“There are some lumber you just cannot buy,” he added. "Some things like plywood, it’s a good example, OSB [oriented strand board] plywood. Everyone buys OSB plywood at Home Depot.
“What happened last year during COVID-19 was that the companies who produce plywood and other lumber materials, shut their factories down, making nothing to sell anyone,” Dishberger said. “Once they do, they sell while demand's up. They started bringing people back. They spread everybody out 6-foot distance and do all these other things, which slows production down. And they have never caught up.”
This means some material is simply unavailable, as he discovers every week.
“And I get a lot of reports every Monday morning and they're saying, ‘Hey, there's the latest one,’” he said. “There's no subfloor, which is the floor on the second on the first floor joists where you stand on the sideline. You're on the second floor. That there's none available, because it's all pretty sold all the way out. It’s not just the price increase. It's availability as well.”
This shortage has caused companies to raise prices.
“The only reason to raise prices [is] demand slows, but you've got your homes sold already,” Dishberger said. “You pretty much have to build it. Everyone last year was like, OK, prices are going to go down.
“Maybe the bill would say, look, here's the number today. It's going up right here,” he said. “This is an imaginary number. Today it's $20,000. You agree to pay your bills, but if the price goes over $20,000, you're going to pay the difference. And we do those kind of contracts. People don't like those kind of contracts because it's up in the air.”
The price point is at the factory level, where raw wood is turned into lumber.
He buys a lot of Southern yellow pine grown in Texas, and understands the entire process.
“The cost of materials has not changed. I have two friends that sell lumber. They had the acreage in East Texas,” Dishberger said. “They actually sell acres and acres and acres of lumber where they come in and cut the lumber. They’re not getting a penny more for the raw materials. Raw materials are exactly the same price. It's supply and demand. You get more money for your product, you will charge it.”
The reality is that finished lumber is a commodity like gold, he said. It’s in short supply but demand remains high, so prices continue to rise.
“The problem is, what's going on is everybody raising their prices. Homes and home prices are going up dramatically,” Dishberger said. “And, typically, when things go up, things don't go back down again very much now, because it's a commodity. They'll just keep their prices where they were and say, ‘That's the new world.’”
The price will likely decrease at some point, but not for the next few months.
“I would hope it would,” Dishberger said. “I'm not seeing any sign of that. I'm not speaking for Weyerhaeuser or Louisiana Pacific and all these big lumber companies, they're probably happy making this kind of money. And as long as they all don't increase supply dramatically, they'll continue making really nice profits.
"But it's America. We'll keep building more and more like anybody else to do the same thing, before you know it, there’s too many homes on the market. But it takes time to run through the system. This is unique and that has gone on for a while. This lumber stuff started last summer and it's still going on strong. And I don't see it falling down to the fall at best.”
The dramatic price increase is especially hard on the people who can least afford it, Dishberger said.
“The big impact, of course, is affordable housing. People who built a million-dollar house, they can afford another $50,000 on their house,” he said. “They're not going to be happy about it, but they can afford it. But if you're building a $200,000 house and it goes up $20,000, $30,000, the guys building it could be losing money and they just say, ‘I'm not going to build this house, let me back out of the contract because I can't afford to build it anymore.’”
Mills and factories that normally operated three shifts dropped to two during the pandemic to allow for increased cleaning, he said. In addition many shut down during the winter for maintenance in their machinery. That added to the supply shortage.
With the advantage of nearly four decades in the building industry, Dishberger knows the pendulum will swing back.
“It’ll take some time,” he said. “But we’ll get there.”
Dishberger was named the 2016 Texas Builder of the Year, the 2008 Greater Houston Builders Association Houston Builder of the Year, and the 1989 Bay Area Builder of the Year.
He has been active in the industry, serving on the National Association of Home Builders’ Board of Directors, as well as president of the Greater Houston Builders Association in 2011. He also was an area vice president for the Texas Association of Builders from 2015-18, chaired the GHBA Government Affairs Committee, was a member of the University of Houston Real Estate Advisory Board, and was president of Bay Area Builders in 1991.
Dishberger has been with Sandcastle Homes since 1996. He has been in the building industry for 38 years after leaving the U.S. Army with the rank of captain.
Dishberger, 63, earned a bachelor’s degree in chemistry from Texas A&M University and a master’s of business administration from the University of Houston. He also received a Graduate Master Builder designation from the National Association of Home Builders.
He has served as the chairman of the city of Houston General Appeals Board and is a formed member of the Planning Commission Chapter 42 Committees, the Harvey Flood Task Force, and Houston Permit Oversite Board. Dishberger maintains a Texas real estate broker’s license.