Lumber Prices Down Nearly 40 Percent From May Peak
The price of lumber has been dropping all throughout June. But how long will this trend last?
After more than a year of skyrocketing costs, lumber prices are finally trending downward.
The price of lumber dropped dramatically over the last two weeks, settling near $1,000 per thousand board feet for the first time since late March 2021, the onset of the pandemic. That dropoff marks a 40 percent decrease from peak May 2021 prices when lumber hit an all-time high of $1,686 per thousand board feet.
Abnormally high lumber prices have been a major concern for the homebuilding industry, creating unpredictability and uncertainty at a time when the industry was otherwise booming. Market experts say that the price was due to fall eventually, but should remain volatile for at least the short term.
“I think ultimately this decline was very much inevitable,” said Kyle Little, chief operating officer of Sherwood Lumber, on a call with Fox Business. “This adjustment we’re going through is just that. We are seeing continued tremendous demand in the pipeline, with continued supply chain problems throughout all of the lumber supply chain.”
Little added such volatility should be expected after lumber’s unprecedented 400 percent price jump over the last year or so. For now, prices seem to have settled around the $1,000 mark, but continued uncertainty in the market makes it hard to predict how low prices may fall, and how long it will take to get there.
In an April note to his clients, commodities analyst Samuel Burman said he expects lumber prices to eventually drop to around $600. “Even though we expect lumber demand to hold up well for some time, we still think that a rebound in supply will lead to a sharp fall in the price of U.S. lumber over the next eighteen months,” Burman wrote.
Speaking at a recent investor conference, Weyerhauser CEO Devin Stockfish agreed with Burman that lumber prices will eventually normalize. But he also cautioned that continued demand for lumber is not likely to fall off in the foreseeable future.
“I don’t think $1,000 lumber prices are the new normal,” Stockfish told the Nareit REITweek 2021 Investor Conference. “With that being said, when you think about the amount of housing we’re going to have to build in the U.S. over the next three, five, 10 years, that’s a significant amount of demand for wood products.”