Lumber Prices See Sharp Decline Following Record High
In May 2021, lumber prices reached a record high of $1,515 per thousand board feet. As we reported in our previous blog, How the Housing Industry Has Changed Since the Pandemic, lumber prices caused building costs to skyrocket after the pandemic hit in the spring of 2020.
Record-high building costs have caused many homeowners and homebuyers to abandon their plans to renovate or build a new home until supply costs return to a reasonable level. As life would have it, it’s these decisions to place building and renovation projects on hold that are helping wood prices level back down. Despite the record high in May, lumber prices reduced by 70% by mid-July 2021. So why did these prices skyrocket to begin with?
Why Lumber Prices Jumped During the Pandemic
The most basic explanation for skyrocketing prices is the age-old reason of supply versus demand. When covid-19 hit US shores in March 2020, many lumber industry professionals scaled back production in case of a pandemic-led recession. Canada’s wood supply also took a hit when government lockdowns shut loggers down and led them to draw unemployment instead of working. Canadian lumber accounts for a large portion of wood supply in the US.
Bored homeowners were the other cause of rising lumber prices. As more and more workers were sent home, more and more homeowners suddenly became dedicated DIYers. This increase in home projects put even more pressure on lumber companies.
Why Lumber Prices are Declining
As the pandemic began to taper down before another wave of new diagnoses hit over the summer, many US homeowners returned to the office or abandoned their home improvement projects due to the high costs of building supplies. This decline in demand coupled with lumber mills restarting and ramping up their production saw a sharp decrease in wood prices following the record high in May.
Since the decrease started, wood prices have continued to drop, weighing in at $389 per thousand board feet as of the last week of August 2021. This is good news for homeowners who have postponed projects due to supply costs, as well as for builders who have had projects delayed due to rising building prices.
What to Expect in the Future
Right now, it’s a wait-and-see situation with lumber. Prices could continue to decrease as long as supply meets demand. But any dramatic change, like a sudden increase in new home construction and renovation projects, could see these numbers rise again. For now, the future looks much brighter for home builders than it did one year ago.