Following a few months of moderating prices last spring and summer, lumber prices are soaring once again, disrupting the housing market and harming housing affordability.
According to Business Insider, Lumber prices are continuing to surge amid Russia’s invasion of Ukraine, and traders could soon see even bigger price swings.
Futures have been on a wild ride since the onset of the COVID-19 pandemic, and they soared to a record high of $1,711 per thousand board feet last May. After tumbling through the spring and summer, they have been rebounding and got a fresh jolt from Russia’s war. Since Vladimir Putin ordered troops into Ukraine, prices have jumped 14% to $1,452, putting them just 15% below the all-time peak.
In January, the National Association of Homebuilders reported that over the past four months, lumber prices have nearly tripled, causing the price of an average new single-family home to increase by more than $18,600, according to NAHB standard estimates of lumber used to build the average home. This lumber price hike has also added nearly $7,300 to the market value of the average new multifamily home, which translates into households paying $67 a month more to rent a new apartment.
According to Random Lengths, as of December 29th, the price of framing lumber topped $1,000 per thousand board feet — a 167% increase since late August.
NAHB calculated these average home price increases based on the softwood lumber that goes into the average new home, as captured in the Builder Practices Survey conducted by Home Innovation Research Labs. Included are any softwood used in structural framing (including beams, joists, headers, rafters, and trusses), sheathing, flooring and underlayment, interior wall and ceiling finishing, cabinets, doors, windows, roofing, siding, soffit and fascia, and exterior features such as garages, porches, decks, railing, fences and landscape walls.
The unprecedented price volatility in the lumber market dates back to April 2020 when the COVID-19 pandemic took hold and sawmills curtailed production in anticipation of reduced demand. When it became clear in the ensuing months that housing weathered the storm much better than predicted and demand remained strong, lumber mills did not ramp up production accordingly.
The slow reaction by sawmills, combined with a massive uptick in demand from do-it-yourselfers and big-box retailers during the pandemic resulted in lumber prices peaking at a record-shattering $1,500 per thousand board feet in May 2021, before beginning a gradual decline through late August.
This most recent lumber price upsurge is due to a number of factors, including:
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