The Random Lengths Framing Composite Price hit $523 per 1,000 board feet for the week ending July 10, the National Association of Home Builders reports. This marks the first time lumber prices have topped the $500 level since July 2018. Since April 17, lumber prices have soared 50%.
NAHB lists the following as primary drivers of the price increase:
- Mills closed in the spring due to stay-at-home and social distancing measures enacted by state and local governments.
- When prices fell between March and April as a result of the COVID-19 pandemic, mills projected that housing would be adversely affected and therefore anticipated a large drop in demand. Accordingly, mills that remained operational substantially decreased capacity utilization.
- Producers did not anticipate the massive uptick in demand from do-it-yourselfers (DIY) and big box retailers during the pandemic.
- Housing weathered the storm much better than most anticipated.
- DIY demand has not abated much as states reopen and construction demand has far surpassed lumber mills’ projections.
The combination of all of these factors has caused a dislocation of the usual supply/demand equilibrium. Suppliers continue to catch up to orders to the point that, in some cases, builders and traders are being forced to place orders without a delivery date or price. Mills were taking orders to the end of July back in early-June, which may have been the driver of the large increase in lumber futures over the past few weeks.
See NAHB’s NAHBNow blog for more information.