The Builder & Developer Materials Market: Why Prices Stay “Wrong” Until They Break
$800/mfbm lumber is not out of the question. A ~45% softwood lumber duty only accelerates a cycle we’ve already seen multiple times.
We now have enough history to be confident about how this plays out.
Short term: Producers eat tariffs. End users don’t see them immediately. Lumber is highly elastic, and with demand weak, prices fall regardless of duty. Mills absorb the pain.
We saw this in 2009, 2015, and COVID. Mill net returns compressed to levels that were mathematically unsustainable. Pricing stayed lower far longer than logic suggested, and then snapped violently once supply finally exited.
That exact pattern is already visible:
Demand is down
Inventories are lean
Buyers are bearish and positioned short
Tariffs show up as mill losses, not retail inflation
But this never holds.
Mills cannot operate indefinitely while losing $200/mfbm. When margins go violently negative, supply doesn’t ease out, it falls off a cliff. Closures don’t happen because the market politely rebalances. They happen because cash burn forces the door shut.
At a 45% duty and a $200/mfbm loss, lumber prices must rise roughly $360/mfbm just to reach breakeven. That math doesn’t require demand to improve, only survival instincts.
This is how lumber always resolves:
Prices stay wrong longer than expected
Losses concentrate where they’re least sustainable
Capacity exits abruptly
Prices respond only after the damage is done
The mistake is thinking lumber is unique.
It’s not.
Other Building Materials Are Following the Same Script
Steel (Rebar, Structural, Sheet)
Steel demand is soft, especially outside infrastructure and energy. Mills are cutting shifts quietly, not loudly. Imports still pressure pricing, margins are thin, and service centers are sitting on inventory they don’t want to reprice downward.
Translation: Steel looks “stable” right until supply tightens and pricing jumps in steps, not increments.
Concrete & Cement
Cement is regional and logistics-heavy. Fuel costs, plant maintenance, and aging facilities matter more than headline demand. Plants don’t idle easily, and when they do, restarting is slow and expensive.
Risk: Local shortages and sudden price increases even while national demand looks weak.
Drywall & Gypsum
Low margins, high transport costs, and limited producers. When housing slows, drywall prices soften, but plant shutdowns happen fast and restarts lag.
Watch for: Availability issues, not just price movement.
Copper & Electrical
Copper pricing is globally driven, but fabrication capacity and labor are the choke points. Even when copper prices soften, finished electrical components often don’t.
Result: Material cost down, installed cost flat or up.
PVC, PEX, Plastics
Oil-linked inputs create volatility, but chemical plant outages and regulatory pressure cause whiplash pricing. These markets don’t drift, they gap.
What This Does to the Bottom Line
This environment punishes:
Fixed-price contracts without escalation clauses
Thin contingency budgets
Builds that rely on “normal” lead times
Pro formas assuming smooth pricing curves
It rewards:
Flexible scopes
Phased purchasing
Strong supplier relationships
Cash reserves over leverage
The most dangerous assumption right now is stability.
Prices don’t gradually normalize. They stay suppressed until producers break, then rebound faster than builders can react.
How to Move in This Market
Separate Demand Signals from Supply Reality Weak demand does not mean low future prices. It often means future shortages.
Buy Time, Not Just Materials Secure allocation, production slots, and delivery windows, even if you delay install.
Over-Communicate with Trades Subs are the canary. When they start hedging bids or shortening validity periods, stress is building upstream.
Avoid Over-Optimized Pro Formas If your deal only works with perfect pricing and timing, it doesn’t work.
Design for Substitution Flexibility in specs isn’t optional anymore, it’s margin insurance.
What to Be Wary Of
“Prices are down, so we’ll wait” That logic has destroyed more budgets than bad deals.
Single-source suppliers They look efficient until they’re offline.
Deferred maintenance at plants Hidden risk that turns into sudden outages.
Tariff complacency Tariffs don’t inflate prices immediately. They hollow out producers first.
Liquidity assumptions Markets don’t adjust through logic. They adjust through financial stress.
The Bottom Line
This is not a buyer’s market or a seller’s market.
It’s a stress-transfer market.
Losses are being absorbed upstream, for now. But they always surface downstream, and when they do, they do it violently.
The builders and developers who survive and win this cycle aren’t the ones chasing the lowest price.
They’re the ones who understand how and when markets actually break, and position themselves before everyone else realizes the damage has already been done.
