Lumber Prices Begin to Drop, Forecasting Good News for Builders.
‘’The best time to plant a tree was 20 years ago. The second best time is now’’ Well, if you planted a tree 20 years ago you might be staring at the most wanted raw material of 2021.
Lumber prices reached historic rates during the first quarter of this year and are finally starting to drop below $1000, almost 40% lower than it’s peak back in may 2021, The National Association of Home Builders says the price tripled in just 12 months. Builders are finally starting to see a light at the end of the tunnel after more than one year of instability and labor shortage caused by the pandemic, but it will take time for things to go back to normal.
According to Dustin Jalbert, an analyst with Fastmarkets, summer will be the season where lumber prices start to correct.
‘’We don’t think +$1000 wood is the future, a lot of this is a reflection of disruptions in the supply chain and some of these short term demand and supply shocks we’re seeing. So either in the second half of this year or early 2022 we’ll see a pretty big correction in prices’’
What caused the lumber price to skyrocket in the first place?
There’s a handful of factors that triggered the lumber price frenzie, most of them fueled by pandemic behavioral shifts.
The housing market is on fire with its prices increasing due to record-low mortgage rates, strong demand from buyers and a persistent need for new construction, and those residing in an older construction also became part of the insatiable demand for lumber products. Do it yourselfers and homeowners had plenty of time during lockdown to finally wrap up that woodwork project sitting in the basement for years. These two main factors set-off a domino effect of the supply chain causing disarray and fall back which is now the main issue to solve. With life going back to the new normal, those DIY projects are the least of the concerns and will have to be put on hold, once more.
How much longer will we cope with the high prices?
Although the experts are stating that lumber prices will continue to go down, this doesn’t mean that they will go back to normal anytime soon. According to Kyle Little from Sherwood Lumber COO, customer demand has fallen off, however the retail prices won’t come down until late july.
‘’Our forecast really hasn’t changed, we’re in month number 12 of what we believe to be a 24 to 30 month cyclical wave. Our customer are very savvy and they’re instructing their customers if it doesn’t need to be done today it might be better to take a breather and start this project late in the Q1- 2022’’.
So just like any other post-pandemic adjustment, builders and home remodelers will have to be cautious on their project schedules and budget if they don’t want to be left out of profit.