Lumber prices that skyrocketed during the COVID-19 pandemic are starting to decline as new home sales drop, but experts advise continuing to wait before building a house or starting on your next project.
Lumber prices peaked in May 2021, reaching a price of $1,711 per thousand board feet, according to Darin Newsom, a market analyst and commentator.
Before the COVID-19 pandemic, prices averaged $300-400 per thousand board feet, Jack Izard, vice president of natural resources investment at Domain Timber Advisors, told McClatchy News. Prices are now around $600 per thousand board feet, he said.
Costs began to surge after March 2020 because of a rapidly increasing demand for lumber as people stuck at home during the pandemic started to take on new projects and look at moving out of the city, Newsom said.
This phenomenon was coupled with a scarcity of lumber supply caused by U.S.-imposed tariffs on Canadian wood and global supply-chain issues brought on by pandemic-related restrictions in other countries, such as China, said Roberto Quercia, a professor at the University of North Carolina Chapel Hill who specializes in housing and community development.
Rising prices and uncertainty surrounding when materials would be available have made it difficult for developers and homeowners to plan, he said.
“A lot of families when COVID started, instead of moving, they decided to expand or build an office space or something,” he told McClatchy News. “The higher cost of lumber and the unpredictability of when that lumber is going to get to your home makes it really complicated to plan such home improvements.”
Now that demand has slowed and the sale of new homes is dropping, the price of lumber is trending downward, too, experts say.
In April — the latest month for which data is available — 591,000 new houses were sold, according to the U.S. Census. In March, 763,000 new homes were sold, and a month before that, 772,000 were sold.
But even though lumber prices are dropping, experts still advise waiting to start on new building projects.
What this means for you
When thinking about building a home or starting on a home-improvement project, homeowners and developers have more than just lumber prices to consider, Newsom said.
Inflation has caused the price of everything, including labor, to rise, meaning that every component of building a house is more expensive than it used to be, he said.
Demand for houses is also still outpacing supply, Izard said.
“Right now, the U.S. is really short on houses, so regardless of what lumber’s doing, just the sheer amount of demand is really driving up the prices of houses,” he said.
The median sales price of a home in April was $450,600, compared with the median sales price in April 2020 of $309,900, according to the U.S. Census Bureau.
On average, housing materials in general have gone up about 20% year-over-year, Quercia said.
“Furnishing, appliances, everything you can think of in a home is more expensive,” he said.
The consumer price index increased 8.5% for the year ending in March, representing the largest 12-month increase since December 1981, according to the Bureau of Labor Statistics.
And though prices are up, sales of homes are slowing because it’s difficult for homeowners selling their homes to find a new house to move into, Izard said.
“They can sell it at a good price, but where do they go at that point?” he said.
Will things ever get back to normal?
Experts say that as demand continues to slow and the global economy bounces back from disruptions caused by the COVID-19 pandemic, prices will start to stabilize.
“There are signs that eventually the market will go back to normal,” Quercia said. “We’re looking at 2025.”
But some developers and homeowners may not want to wait three years to start their projects.
Experts say lumber prices will drop even more as soon as August when U.S. tariffs on Canadian softwood will be reduced, Quercia said.
Duties on shipments of Canadian lumber to the U.S. will go from 17.99% to 11.64%, according to the National Association of Home Builders.
“Reducing these tariffs is an important step forward to addressing America’s growing housing affordability crisis and easing extreme price swings in the lumber market that have added more than $18,600 to the price of a new home since late summer,” the association said in a statement.
Newsom said from a strictly lumber standpoint, building now or a few months from now could be a good idea. But he advised anyone who is able to wait to start their projects to hold off until prices in general trend back down.
“If they want to lock in their lumber prices now, it’s better than what it would’ve been before,” he said. “But (the price of) a house as a whole — I would probably hold off and wait for inflation in general to come down.”
This story was originally published June 13, 2022 3:25 PM.