Lumber prices per 1,000 board feet have doubled over the past three months, making it more expensive to build the single-family housing that’s desperately needed.
March’s Random Length Lumber Futures showed prices at $1,004.90 per 1,000 board feet on Thursday. It was the first such time lumber prices hovered over $1,000.
According to the U.S. Census, starts of single-family houses dropped by 12 percent when compared to December, which saw permits of single-family homes at 9.6 percent, or 28 percent higher than December 2019.
There’s a great demand for newly built homes that are more affordable for consumers, but the problem is that builders can’t deliver on that right now with lumber prices so high.
Robert Dietz, National Association of Home Builders chief economist, said: “Builders report concerns over increasing lumber and other construction costs and delays in obtaining building materials. Rising interest rates will also erode housing affordability in 2021 as inventories of existing homes remain low.”
Unfortunately, this is causing anxiety for some executives of home building companies, so many are slowing production while waiting out the higher price tags currently seen on lumber. Executives have noted their apprehension on earnings calls.
Analysts say the prices are not likely to come down any time soon. Pressure points, which usually lower prices, haven’t yet accomplished reducing the burden of higher prices.
According to Joe Sanderson of Domain Timber Advisors, the following developments are worth noting. He said La Nina is creating an arid pattern in the South, leading to more logging, bolstering lumber supplies. Added to that, more lumber mills are selling online than ever before. Canadian lumber is also cheaper than ever, making it easier and more affordable to import lumber from Canada. Canadian tariffs for lumber fell to nine percent from 20 percent.
Sanderson said lumber producers have been attempting to lock in yield and returns while there’s a strong demand. So, there’s likely an oversupply of lumber.
Lower interest rates, combined with robust housing demand and a home remodeling increase, could edge prices even higher.