Lumber prices are on the rise again as supply tightens, residential construction projects pick up, and the U.S. prepares to double a tariff on Canadian softwood.
That means home prices will stay higher, Bloomberg reported, noting that lumber futures this week are about double pre-pandemic levels. Supply is tightening both in British Columbia and in the southern U.S., two key sources for the nation.
Sawmills in British Columbia slowed production as the government-adjusted cost of logs quadrupled earlier this month from a year ago. Labor disputes and a shortage of workers at mills in the south, reflecting low pay and dangerous conditions, are also crimping supply.
Lumber futures have been volatile since the beginning of the pandemic. High prices even forced some homebuilders to halt work.
Builders have largely passed the prices onto homebuyer. The price of the average new construction home in the U.S. rose as much as $40,000 earlier this year during a spike in lumber costs.
Prices rose steadily in the first half of the year, peaking in the spring and falling even more quickly, to 2021 lows, in August as supply ballooned.
Futures have since started to rise again.
“We’re seeing futures prices going back up, and that will undoubtedly mean the price of retail lumber builders buy goes up,” said Jerry Howard, CEO of the National Association of Home Builders.
Brian Leonard, an analyst with RCM Alternatives, expects prices to rise through the first quarter of next year.
Even as prices fell earlier this year, homebuilders capitalized on strong demand for homes and kept prices high. Rising interest rates, inflation and rising home prices could help counter price volatility.
[Bloomberg] — Dennis Lynch