Lumber Prices Hit All-Time High

[Tariq Hakeem]

High lumber prices are driving up the price of new build homes.

Lumber futures hit $1,260 per thousand board feet on the Chicago Mercantile Exchange. If that sounds like a lot, well, it is—an all-time high.

Lumber prices have soared during the pandemic. Last April, that same order would've cost just $358.

If you think this doesn't affect you...you probably haven't been house hunting recently. Astronomical lumber prices have added $24,000 to the cost of a typical single-family home and $9,000 per apartment, according to the National Association of Home Builders.

What's going on?

1. The pandemic. At its outset, Covid forced many mills to temporarily close. When historically low mortgage rates met a summer wave of homebuying, renovations, and DIY-ing, producers were unprepared for the demand surge.

Lumber prices kept rising during the winter months, so homebuilders and lumber yards delayed their purchases, hoping prices would come down. Now, with the busy spring/summer building season ahead, homebuilders and lumber yards are rushing to get coveted boards, driving prices even higher.

2. The plague. Not the human one. Since the 1990s, warmer winters have caused mountain beetles to spread further across British Columbia, infecting more forests. Their arboreal appetites have diminished harvests.

Somewhat ironically, in Europe, a different beetle plague is also getting worse and forcing loggers to cut down infected trees before the wood becomes unusable. As the US looks for more supply, Europe has extra to export.

3. Labor. Mills could theoretically produce more...except some are facing labor shortages. While the job can include lots of Vitamin D and flannel, low pay and the difficult, sometimes dangerous work required has pinched manpower.

Bottom line: The number of homes for sale continues to sit near a record low. While that should be a dream for construction businesses, rising prices and tight inventories for lumber and other building materials have made it more expensive for builders and, in turn, created an affordability crisis for buyers.