From Bob Filka, HBA of MI CEO:
A little more detail in case you get any more media calls
Not new, Been going on for over 30 years. The trade agreement that has governed Canadian imports of softwood lumber since 2006 effectively expired at the end of 2016.We advised our members at the beginning of March to add language to their contracts allowing for material cost increases to be passed on to their clients. About 30 percent of the softwood lumber used in residential construction comes from Canada.
We expect to see an increase in the cost of American-produced softwood lumber as well as this is what happened before. Because of the uncertainty surrounding a new trade pact we've already seen a 22% spike in lumber prices since the beginning of the year. These price hikes have negative repercussions for millions of Americans. It takes about 15,000 board feet to build a typical single-family home and the lumber price increase in the first quarter of this year has added almost $3,600 to the price of a new home.
We agree with the NAHB best way to resolve this trade impasse and avoid these negative economic repercussions is to:
- Urge the U.S. and Canada to work cooperatively to achieve a long-term, stable solution in lumber trade that provides for a consistent and fairly priced supply of lumber
- Increase domestic production by seeking higher targets for timber sales from publicly-owned lands and opening up additional federal forest lands for logging in an environmentally sustainable manner
ARE YOU PROTECTED...
...against unforeseen increase in material costs?
There has been much discussion both in Michigan and nationally about the possibility of increases in the cost of materials, particularly lumber and glass. (The U.S./Canada dispute over the importation of softwood lumber has not yet been resolved and looks to be heating up again.)
You may want to review your standard customer contract language and make sure to include an escalation clause that would allow the contract to be adjusted if material costs do rise abruptly. In the event that you do not have such a provision in your contract, HBAM's legal counsel recommends that the language found below be used. Obviously, this language may not fit every circumstance or customer agreement your may have or develop in the future and we strongly recommend that you seek your own legal advice if they have any questions about how to address this issue. Most importantly, however, we want to make sure they are protecting themselves.
A tip of the hat to HBAM Past President Mike Theunissen for first bringing this to our attention.
MATERIAL COST INCREASES. The Contract Amount is based on the current price for materials from local suppliers as of the date of execution of this Contract. If a price increase in the materials set forth below occurs after the date of execution of this Contract, Owner agrees to pay the amount of the difference in cost to the Builder. Builder agrees to use reasonable efforts to seek the best available local price on comparable terms and to identify substitute materials which are suitable and not as volatile in price. Builder shall provide written notice to Owner stating the increased cost, the material, and the supplier, and to provide or maintain for inspection the invoices or bills of sale for the materials.
Material Current Price per (Unit) Date Supplier
All increases in, and all new taxes, excises, or other governmental charges hereafter imposed on the production, sale, or transportation of the material shall become part of the price payable by Owner.