The price of lumber on the futures market has given up all of its gains for this year, falling by more than 50% in just the last few months. Homebuilders, homebuyers and homeowners looking to remodel, however, are not seeing savings yet.
Lumber prices hit a record high on May 7, at $1,670.50 per thousand board feet on a closing basis. That was more than six times their coronavirus pandemic low in April of last year.
The spike was due to sudden soaring demand and low supply both due to the pandemic. Saw mills closed at the start and did not ramp up production quickly enough to meet the new demand from builders and remodelers. Homebuyers and homeowners alike wanted more space, and that meant more lumber.
Now demand for remodeling is falling, as people spend more money on vacations instead. Homebuilders are still seeing strong demand, but they have slowed construction due to high costs. Saw mills have gotten back on line, but many are having issues finding enough labor.
Lower lumber prices are a welcome sign but not a reality yet on the retail side. Lumber prices are also still up nearly 100% from the spring of last year.
“As the price declines began grabbing headlines, the price of lumber packages quoted to builders held at record highs,” wrote David Logan, senior economist at the National Association of Home Builders. “In economics jargon, prices paid by builders—or ‘street’ prices—were ‘sticky.’ This dynamic is primarily due to dealers’ inventory carrying costs and potentially large differences between the price at which inventory is bought and sold.”
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