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Lumber prices finally dropping

Mortgage rates, inflation hampering commodity’s market

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If prices fall in the forest, do they even make a sound? A dip for lumber might sound triumphant to weary homebuilders.

The price of lumber dropped to $829 per thousand board feet on Tuesday (April 12th), the lowest mark for the commodity in 2022, Insider reported. Rising mortgage rates and growing inflation were cited as causes for the slip, along with a decline in home renovations.

The pricing represents a big 39 percent drop from only last month, according to Insider, when lumber was trading for as much as $1,357 per thousand board feet at its high for the month. The price is less than half of what it was in May when it hit a peak of $1,733 per thousand board feet.

While rising mortgage rates and inflation are beginning to scare off some homebuyers, the drop in lumber prices could be the boon builders need to push back against the persistent supply and demand problems plaguing the market throughout the pandemic.

In February, privately-owned housing starts rose 22.3 percent year over year, according to the U.S. Census Bureau. The seasonally adjusted annual rate of nearly 1.77 million housing starts was up 6.8 percent from the previous month. Single-family housing starts, meanwhile, increased 5.7 percent from the previous month.

More homes appear to be on the way, as building permits for privately-owned housing units also jumped 7.7 percent year over year, though they dropped 1.9 percent from the previous month.

The National Association of Home Builders/Wells Fargo Housing Market Index slid for the third month in a row in March, dropping below 80 points for the first time since September. The report cited construction costs as a factor driving down homebuilder confidence.

The report came the same day the Federal Reserve raised interest rates for the first time since 2018, hiking the benchmark by a quarter of a percentage point. The rate increase will likely make borrowing more expensive, in turn making people less likely to spend.

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