Lumber prices, adjusted for inflation, are nearing all-time lows and are currently 20%-30% below production costs, says Sherwood Lumber COO Kyle Little. During the pandemic, lumber prices skyrocketed to $1,514 per thousand board feet in May 2021 due to a surge in housing starts but then plummeted in 2022, hitting a low in early 2023. Although there was a brief rebound, prices dropped again in March 2023 and recently traded around $450 on the Chicago Mercantile Exchange. Little notes that prices might continue to fall, despite a slight recent uptick. Lumber, often a leading indicator for other construction materials, suggests a potential bear market rally ahead. The drop in prices is driven by weak housing demand, reflected in a 5.5% decrease in new home construction in May 2023, the lowest since June 2020. Additionally, the supply of lumber has increased as investments made during the high-price period of 2021-2022 are only now coming online, exacerbating the mismatch between supply and current demand.
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