Housing boom also fuels increase in lumber futures
Lumber prices have surged through the roof over the past couple of weeks, as the demand for new homes shows no signs of wavering.
Lumber prices – which generally drop during the winter – have hit record highs for species, products, and grades this season, the Wall Street Journal reported citing data from pricing service Random Lengths. Oriental strand board (often used for walls) and Southern yellow pine (commonly used for fences and decks) are selling for their highest prices.
There is also a supply shortage in engineered wood products used in new construction, which are on backorder until March, according to the pricing service. Last week, the Random Lengths Framing Lumber Composite price jumped to $966 per thousand board feet, up from $955 in September.
Lumber futures have skyrocketed 47% over the past three weeks, WSJ said. Lumber for March delivery stopped trading Friday at $982.10 per thousand board feet, more than double the price in 2020. Futures for March 2022, starting at $695, were the cheapest and most distant. However, it is still well above the pre-COVID record of $639.
“We don’t expect these prices forever, but what we are seeing is a bit of acceptance that maybe going forward the price level may be different than it has been in the past,” Chris Virostek, finance chief at West Fraser Timber – North America’s largest lumber producer – told the WSJ.
During the onset of the pandemic, mills slowed down production over fears that home-building demand will wane due to widespread job cuts. They couldn’t be more wrong. Americans forced to shelter at home became more motivated than ever to complete home improvement projects and buy new homes with more living space. Historically low rates only fueled the housing boom.
Housing starts and building permits for private-owned residential units reached a 15-year high in December.
“If lumber pricing doesn’t adjust back to where we would expect it to, some of those starts may be in question,” Matthew Birenbaum, AvalonBay’s investment chief, told the WSJ.