Lumber Prices Continue to Vex Construction Industry

Photo by Marissa Daeger on Unsplash
Published On
Jan 31, 2022

It has been a chaotic two years for the construction supply chain, particularly for lumber. After experiencing record-high prices of more than $1,600 per thousand board feet in May 2021, the cost of lumber began to gradually decline over the summer. However, over the last four months of 2021, lumber prices started to rise again, nearly tripling to $1,000 per thousand board feet as of Dec. 29, according to the National Association of Home Builders (NAHB).

These prices have not abated much in the past month. Bloomberg reported the price of lumber on the futures market at $1,219 per thousand board feet on Jan. 6, 2022, although it did decline [CC1] to $1,053.70 by Jan. 25.

For comparison, the price of lumber in April 2020 was only $350 per thousand board feet, as reported by the NAHB.

The NAHB attributes the recent price increases to the ongoing supply chain disruptions dating back to the beginning of the pandemic, a doubling of tariffs on Canadian lumber imports and an unusually devastating wildfire season in the West. Flooding in British Columbia in late 2021 that washed out roads and rail lines and forced many sawmills to shutter, as well as vaccine mandates for cross-border truckers and an overall shortage of drivers, have also disrupted supplies and shipments, according to Bloomberg.

The volatility of lumber prices is certainly causing the construction industry to feel the pinch. For example, the NAHB notes that rising lumber prices are causing the price of an average new single-family home to increase by more than $18,600, which hurts the buying ability of prospective homebuyers. It has also added nearly $7,300 to the cost of an average new multifamily home.

Mark Fleming, chief economist at First American Financial Corp., remarked on the challenging recovery from such a volatile market in a January report by the radio program Marketplace. He said that the demand for new homes will continue to push up prices.

Moreover, he said, “How do you fix a supply shortage, driven by a sheer lack of something like a tree, which takes a long time to grow?”

 [CC1]wondering if “decline” is the right word here, but I don’t know much about investment/economics vocabulary. Would “decrease” or “fall” be more appropriate?

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