High housing demand causes lumber prices to soar

One of the most dramatic threads in the story of real estate over the last year has been the truly staggering rise in the price of lumber. Lumber prices have gone up and up continuously surpassing all previous records, and there seems to be little signs of slowing down.

As of Monday, the lumber futures price was at $1,575.60 per thousand board feet. This is well above the peak price from last year, when lumber reached $984.50 over the summer, which was still incredibly high. For comparison, lumber typically averages around $400 per thousand board feet. The current price is nearly four times that.

Sawmill companies, such as Canfor, Weyerhauser, and PotlachDeltic, are doing best in this market. Lumber and other wood products are being sold practically as soon as they get out of the mills. A traditional excess of supply in timberland, especially in the South, means that mills can maximize profits by purchasing pine at extremely low prices.

Lumber initially dropped sharply last March, as few people predicted the impact COVID would have on the housing market. It quickly rebounded, however, and the price has just kept rising. Last summer, the price was further inflated by disruptions in supply chains.

The insanely hot housing market has kept the price of lumber high. With mortgages so affordable, people are still eager to enter the housing market. This has driven the biggest influx in housing construction since 2006. The last year has also seen many homeowners stuck in lockdown turn to remodeling. The demand for lumber is so intense that it has not curbed the rising cost of lumber.

The federal reserve has signaled recently that they will keep interest rates ultra-low as the economy makes its way to full recovery. As long as mortgages continue to be so affordable, demand for houses will likely stay incredibly high.

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