Lumber prices saw a 6 percent decrease in price this week, bringing the cost of the essential building commodity to its lowest level of the year.
The price of lumber dropped to $829 per thousand board feet on Tuesday, a 39 percent drop from just a month earlier, when they traded for as much as $1,357 per thousand board feet. It represents a 52 percent price drop from May 2021, when prices sat at $1,733 per thousand board feet, according to a report in Insider.
While some reports have suggested the price reduction was a response to weakening mortgage demand as rates surge, other experts have pointed to existing supply chain issues as the real culprit.
“One thing that we’re seeing is a bottleneck issue,” said Chris Beard, director of building products research at John Burns Real Estate Consulting. “The mills seem to be backed up, transportation issues continue to be a problem in getting product out of the mill. So the decline we’re seeing right now in futures isn’t necessarily demand-driven, it’s really supply-driven.”
Lumber prices are still roughly double what they were before the pandemic, signaling a market that is still very out of whack.
“At around $830 per thousand board feet that we’re seeing right now, compared to the pre-pandemic price of around $400, we’re still at really elevated lumber prices,” said Matt Saunders, senior vice president for building products at John Burns Real Estate Consulting. “This is still signaling a supply-starved environment.”
Another factor cited is the reduction in DIY home improvement projects due to record-high inflation levels making projects too burdensome for many homeowners. While he acknowledged the slowdown in the DIY sector, Saunders pointed out that the professional remodeling space is still seeing strong demand.
“There’s a real dichotomy between pro and DIY,” he said. “The pro is much stronger than the DIY. I think if there is any softening in the market you could extend it to the DIY segment, but the pro has held off quite well right now.”
Elevated lumber prices have been one of the chief drivers of the historically low housing inventory gripping the country throughout the pandemic, with builders facing high costs and supply chain delays, and passing those costs on to consumers. The most recent National Association of Home Builders survey of builder sentiment found that ongoing supply constraints continued to affect builder sentiment, with builder confidence in the single-family sector falling two points to 79 in March 2022.
While the current slowdown in pricing may help get more projects off the ground in the short term, builders are still facing bottlenecks for other essential materials, meaning delays will likely remain commonplace.
“You can’t just look at one building material,” Saunders told Inman. “You can have the lumber, but if you don’t have the windows, that’s a constraint.”