They say money doesn’t grow on trees, but over the last year it did.
Lumber prices skyrocketed to historic highs during the coronavirus pandemic, fueled by a demand for new homes and a surge in renovations and DIY hobbyist projects by those of us on lockdown.
Now those record wood prices are finally starting to crack, and more builders across the U.S. are able to reach for their toolboxes.
Robert Dietz, chief economist at the National Association of Home Builders, said some projects that have been in limbo because of the prohibitive cost of wood may begin to resume.
“If it’s the case that the price is coming down because it does represent a true uptick in the amount of supply, we’re going to see some of those projects move forward,” Dietz said.
How wood got so expensive
The construction-grade softwood-lumber market saw wild price swings over the past year, driven in part by the pandemic.
Demand for new homes and thus framing lumber like pine two-by-fours have surged. Some homeowners on lockdown indulged in their woodworking hobby or finally got around to renovation projects that had been on hold.
Meanwhile, sawmills struggled to keep up with the increased demand, especially as their workers were forced to stay home during infection spikes or actually caught the coronavirus.
The greater demand for lumber coupled with the dearth of supply meant only one thing: higher prices.
The futures price of lumber in March 2020 was $303.40 per thousand board feet. That cost more than quintupled over the following 14 months, reaching a high of $1,607.50 this May.
The Framing Lumber Composite Price, a real-time index of construction-wood prices calculated by the industry publication Random Lengths, hit $1,514 per thousand board feet in May.
Jerome Powell, chair of the Federal Reserve, recently said the supply shortages driving up the price of lumber (and other goods) have been one of the causes of rising inflation.
But both the futures price and the current price of lumber declined substantially into June, and industry experts say the lumber price hike is finally beginning to dwindle.
Why the price of lumber is dropping now
A number of factors are shaving hundreds of dollars off the wholesale price of softwood lumber.
According to Dustin Jalbert, an analyst with Fastmarkets, the country turning the corner in the pandemic has meant that sawmills have been able to ramp up production and some people who had been working from home are returning to offices and other workplaces.
“If you’re spending less time at home, you’re probably spending less money on the home,” he said. “That remodeling, renovation, DIY boom — whatever you want to call it — that’s also softening.”
Jalbert added that the demand for lumber is expected to drop as construction slows in the coming colder months, driving the price down even further.
The Framing Lumber Composite Price dropped to $1,113 last week, a decline of $211 from the week prior. Lumber futures hit $904.90 over the weekend.
But consumers are not out of the woods yet.
Jalbert said it could take several weeks for price reductions to take effect in retail home centers. And even then, he added, “people should know that prices are probably not going to fall to the levels that they were before the pandemic.”