Knock on wood: Cost of lumber drops back to 2020 levels

Knock on wood: Cost of lumber drops back to pre-pandemic levels

Lumber futures have fallen again to the place they have been earlier than the pandemic ignited a growth in housing and stretched provide chains to the restrict, in line with knowledge compiled by Nasdaq.

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For a lot of the pandemic, maybe no building materials has been the supply of more public hand-wringing amongst homebuilding circles than lumber.

Shocks to the provision chain and elevated demand for brand spanking new houses conspired to drive up lumber costs from $400 per thousand board ft in 2020 to as excessive as $1,500 for a similar quantity of wooden simply over a 12 months later.

However since then, costs have careened again to earth, rocketed up once more, and solely in latest days settled again down close to the place they started within the first place.

Lumber futures on Thursday closed at $432.80 per thousand board ft, a mark now inexpensive than what they traded for in February of 2020, according to Nasdaq.com. Costs continue to be volatile, however a steep decline in demand for brand spanking new houses might lastly be taking stress off the strained supply chains that service homebuilders.

Lumber futures, final 5 years

Chart from Nasdaq.com

Lumber’s radical rise and fall illustrates the challenges that builders have confronted for a lot of the pandemic.

In earlier months, builders had been scooping up extra lumber than they wanted, fearing that costs would solely rise additional. A high worker at a lumber wholesaler recently told The Wall Road Journal that this run on lumber is now over.

“All of the urgency over the previous two years — ‘give me every thing you may’ — that’s mainly over,” Michael Goodman, director of specialty merchandise at Sherwood Lumber Corp., advised the newspaper. “Lumberyards should not petrified of the value going up.”

Nonetheless, simply because lumber costs have come again all the way down to earth doesn’t imply that all construction materials are inexpensive once more.

As of August, items which might be inputs to residential building remained 38 % dearer than they have been in February of 2020, in line with the U.S. Bureau of Labor Statistics’ producer worth index.

Whereas that quantity is down a bit off its excessive level in June, this broad basket of construction-material costs — of which lumber is just one element — stays considerably elevated. It contains supplies like cement, brick, drywall and others which might be important for constructing new houses from the underside up.

Whereas discount in lumber costs might in concept come as welcome information to builders, the continued volatility has proven to be a headache. The extra understated fall in the price of different supplies has additionally stored building expensive.

Builders have become more pessimistic about the business climate in latest months as demand for brand spanking new houses has fallen, and the outlook for future gross sales has worsened, in line with the Nationwide Affiliation of Dwelling Builders’ month-to-month builder sentiment survey.

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