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Lumber Prices Hit Record Highs
By Jeff Cornelius - February 26, 2021
On February 22, 2021, lumber hit a record $1,021 per thousand board-feet on the futures markets. To put this in perspective, just a month earlier it sold at $668 on January 19th and $500 in November of 2020. The lowest price for lumber on the futures market in 2020 came on April 1 at $259 - the market still reeling from the shock of COVID. Prices would never be that low again in 2020 as housing demand surged.
So, why are lumber prices hitting record highs? Prices typically increase in the Spring in anticipation of the summer building season, but those in the industry are facing increases much higher, and much sooner than they’re used to. These increases are simply the effect of a supply and demand imbalance. Driven by supply slow-down at the early stages of the pandemic, and followed by a huge increase in demand which not many people saw coming, the US and Canadian lumber mills have been playing catch-up ever since. This has kept the supply/demand equilibrium consistently tilted in favor of higher prices.
What has the effect been on consumers? So far, most new home buyers have been able to absorb the higher cost of lumber because interest rates have been so low. But, the house still costs more, $24,000 more on average, according to the National Association of Homebuilders. The NAHB is so concerned about the negative effect on the housing market, it’s been lobbying the Biden administration to remove the 15% tariff on Canadian lumber and renegotiate import limits to allow more Canadian lumber across the border.
So, what does this mean for builders? If you’re doing new construction of any kind, and especially if you are a production builder, you should be putting your orders in early to lock in the lowest possible pricing and ensure delivery. Stay engaged with your suppliers and monitor the market as it changes. It’s not just framing that’s affected; prices for siding are increasing, too. Those builders who keep their relationships strong will benefit over those who only call or email when they need to place an order. If you stay in touch with your supplier, you’ll be the first to know when prices are starting to soften, too.
What does this mean for new home consumers? As of this writing in February of 2021, If you’re in the market for a newly built home, you’ll be doing yourself a favor by getting under contract as soon as you can. With lumber prices high, and housing prices projected to increase in 2021 due to high demand anyway, you’ll likely already have a little equity in your home by the time you move in.
What does this mean for remodelers and do-it-yourselfers? That deck you’ve been planning is going to cost more this year than you may have budgeted for. Call around for the best prices on the lumber you’re looking for and make sure your supplier has enough of what you want in stock before renting that truck or trailer and driving over.
These record-setting prices won’t last forever, but they are going to have a negative effect on the housing market for the foreseeable future.
Image credit: tradingeconomics.com