Released June 21, 2021 | SUGAR LAND
en
Researched by Industrial Info Resources (Sugar Land, Texas)--The lumber price bubble has finally burst. In what has been described as a perfect storm of skyrocketing demand and insufficient supply over the course more than a year, lumber prices dropped last week after soaring to new heights.
Prices dropped to about $1,200 per thousand board feet after hitting a record high of more than $1,500 in May, according to Fortune magazine. Soaring lumber prices had nearly tripled over the past year.
The fall in prices this month has been linked to a drop in new home construction and home-improvement sales in May, as the market finally balked at the high price of lumber, according to Fortune.
Also, "lumber producers have plans to build eight new grassroot sawmills that will add more than 1.5 board feet per year of product," said Randy Godet, Industrial Info's vice president of research for the Pulp, Paper & Wood Industry. "These are expected to come online over the next 12 to 24 months and will help sate some of the demand, and we could see prices pull back even further. "
"We're not alarmed to see a drawback in lumber prices because more capacity started coming online earlier this year," Godet continued. "And even with the additional capacity that is slated for 2022, we think that it's unlikely that prices will fall below pre-pandemic levels ($500-$600 per 1,000 board feet) anytime soon because demand will remain strong given that the U.S. is facing a shortage of new houses--even with current housing starts on track for more than 1 million units in 2021 and are forecasted to be incrementally higher in 2022."
Industrial Info is tracking $963 million worth of lumber and wood-related projects in the U.S. that are under construction. Subscribers to Industrial Info's Global Market Intelligence (GMI) Pulp, Paper & Wood Project Database can click here for a list of detailed reports.
Click on the image at right for a graph showing U.S. lumber and wood-related project activity that is under construction, by market region.
Lumber prices began rising more than a year ago as U.S. homeowners on lockdown during the COVID-19 pandemic embarked on a wave of do-it-yourself (DIT) projects, driving up demand. Also, growing demand by millennials led to the tightest housing market in recent years.
Skyrocketing lumber prices caused the price of an average new single-family home to increase by $35,872, the National Association of Home Builders (NAHB) said in April.
Overall housing starts increased 3.6% in May to a seasonally adjusted annual rate of 1.57 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
"However, single-family permits posted a decline as higher construction costs are deterring some residential construction activity. Policymakers need to help the industry's supply chains in order to protect housing affordability," said NAHB Chief Economist Robert Dietz.
In the latest U.S. Federal Reserve Beige Book on economic activity, released June 2, several of the regional U.S. Reserve banks noted the high lumber costs.
"Construction and real estate activity increased slightly over the reporting period. Residential construction was little changed from a strong level. Contacts said that rising costs due to limited lot availability and higher material costs (particularly for lumber) were putting a damper on building," said the Federal Reserve Bank of Chicago.
In an effort to meet demand, North American softwood sawmill capacity increased by 1.4 billion board feet in the last year, according to Forisk Consulting. Most of that increased capacity--1.1. billion board feet--was from manufacturing in the U.S. South. The entire wood products manufacturing sector continues to produce at the highest levels since the Great Recession, according to the Federal Reserve Board.
Still, the market isn't expected to balance out for some time to come, according to market observers.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
Prices dropped to about $1,200 per thousand board feet after hitting a record high of more than $1,500 in May, according to Fortune magazine. Soaring lumber prices had nearly tripled over the past year.
The fall in prices this month has been linked to a drop in new home construction and home-improvement sales in May, as the market finally balked at the high price of lumber, according to Fortune.
Also, "lumber producers have plans to build eight new grassroot sawmills that will add more than 1.5 board feet per year of product," said Randy Godet, Industrial Info's vice president of research for the Pulp, Paper & Wood Industry. "These are expected to come online over the next 12 to 24 months and will help sate some of the demand, and we could see prices pull back even further. "
"We're not alarmed to see a drawback in lumber prices because more capacity started coming online earlier this year," Godet continued. "And even with the additional capacity that is slated for 2022, we think that it's unlikely that prices will fall below pre-pandemic levels ($500-$600 per 1,000 board feet) anytime soon because demand will remain strong given that the U.S. is facing a shortage of new houses--even with current housing starts on track for more than 1 million units in 2021 and are forecasted to be incrementally higher in 2022."
Industrial Info is tracking $963 million worth of lumber and wood-related projects in the U.S. that are under construction. Subscribers to Industrial Info's Global Market Intelligence (GMI) Pulp, Paper & Wood Project Database can click here for a list of detailed reports.
Lumber prices began rising more than a year ago as U.S. homeowners on lockdown during the COVID-19 pandemic embarked on a wave of do-it-yourself (DIT) projects, driving up demand. Also, growing demand by millennials led to the tightest housing market in recent years.
Skyrocketing lumber prices caused the price of an average new single-family home to increase by $35,872, the National Association of Home Builders (NAHB) said in April.
Overall housing starts increased 3.6% in May to a seasonally adjusted annual rate of 1.57 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
"However, single-family permits posted a decline as higher construction costs are deterring some residential construction activity. Policymakers need to help the industry's supply chains in order to protect housing affordability," said NAHB Chief Economist Robert Dietz.
In the latest U.S. Federal Reserve Beige Book on economic activity, released June 2, several of the regional U.S. Reserve banks noted the high lumber costs.
"Construction and real estate activity increased slightly over the reporting period. Residential construction was little changed from a strong level. Contacts said that rising costs due to limited lot availability and higher material costs (particularly for lumber) were putting a damper on building," said the Federal Reserve Bank of Chicago.
In an effort to meet demand, North American softwood sawmill capacity increased by 1.4 billion board feet in the last year, according to Forisk Consulting. Most of that increased capacity--1.1. billion board feet--was from manufacturing in the U.S. South. The entire wood products manufacturing sector continues to produce at the highest levels since the Great Recession, according to the Federal Reserve Board.
Still, the market isn't expected to balance out for some time to come, according to market observers.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
