After peaking at around $1,700 per thousand board feet in mid-May, lumber prices sank below $1,000 per thousand board feet this week for the first time since late March, according to Random Lengths. Since falling by approximately 23% between September 2020 and November 2020, lumber prices surged into 2021, reaching record levels beginning in March.
Rising prices became a top concern across the construction industry, with numerous industry associations, including the National Association of Home Builders (NAHB) and the National Lumber and Building Material Dealers Association (NLBMDA), pushing government officials to prioritize the issue. The NAHB estimated the significant spike in softwood lumber prices between April 2020 and April 2021 added nearly $36,000 to the price of an average new single-family home and approximately $13,000 to the market value of an average new multifamily home. In addition to the risk the price increases, and related supply-side issues, posed to construction firms, the NAHB estimated the increase in average home prices priced out more than 5.5 million households.
Even as lumber prices soared in May, analysts at BMO Capital Markets projected lumber prices would drop by the second half of the year and return to more typical levels in 2022. The bank cited affordability concerns as the chief reason for expected lumber price reliefs.
“Household wallets are not unlimited and at some point, demand could shrink amid a reluctance to shell out extra dough for the same studs and sheathing,” BMO Capital Markets forecast in May.
Beyond affordability, expanding supply has also contributed to lumber’s recent price decline. U.S. lumber production has increased 5% in the past 12 months, with another 5% increase expected, according to Domain Timber Advisors via Bloomberg.
While prices have begun to decrease, and are trading roughly 40% below their mid-May peak, lumber prices are still up 175% on a year-over-year (YOY) basis, according Business Insider. Analysts project prices will remain “above trend” in the short-term future, despite the recent rapid decline. Speaking with CNBC, Sherwood Lumber COO Kyle Little said while relief is expected over the next six to 12 months, the prices seen will still be “much, much higher than prices we’ve experienced in the recent past.”
While the past week has seen a reprieve on lumber prices, supply-side shortages continue to significantly affect the construction industry. A recent report from the NAHB found the shortage of materials was more widespread than any other period since the association began tracking the issue in the 1990s. The NAHB’s May Housing Market Index (HMI) survey in May 2021 found approximately 90% of builders who buy framing lumber, plywood, and OSB reported shortages. However, shortage issues for builders extend beyond lumber, as sourcing appliances and windows and doors are issues plaguing around 90% of builders, according to the NAHB. A recent survey of the JLC readership also found windows and doors had long wait times, ranging from from about 2-3 weeks to as many as 17 weeks for some readers. Lighting, electrical and plumbing fixtures, cabinets, and appliances were among the other items the JLC readers reported had long lead times.