The price of lumber has been declining consecutively for weeks – up until the first week of September.
According to Markets Insider, lumber costs have descended to levels not seen since November 2020 in mid-August. From May until now, pricing fell approximately -68.57%. Currently, after a slight increase likely due to Hurricane Ida, the commodity sits at roughly $520 USD per 1.000 board feet. About a year ago, it cost around $888. Despite the recent slight increase, pricing is still down -34% YOY.
Stuart Katz, CIO at wealth management firm Robertson Stephens, said the price of lumber could reach its pre-pandemic level by mid-2022. However, remaining at that price level depends on geography, natural disasters, the Federal Reserve’s monetary policy, and the ability of new home builders to take margin cuts or pass along price increases.
What does this mean for New Construction?
Between low interest rates, the increase of remote job opportunities, and online schooling, there’s no doubt that there has been a boom in new home construction due to the pandemic. On top of that, the nation has been consistently lacking an adequate supply of housing to meet demand, pushing even more people into the market for new homes. Millennials, specifically – purchasing impatiently, oftentimes before the house is even built – make up 39% of that market.
To keep up with the demand, home builders have been forced to put monthly caps on sales, and backlogs on construction start dates. Although the market is cooling off, it still remains competitive. With the cost of lumber slowly becoming more affordable, building interest among buyers will be even higher.
New home construction will continue to dominate the market, despite lumber costs fluctuating. Homebuyers will always flock toward avoiding bidding wars and securing locked-in sale prices.