What Caused Such High Lumber Prices?
If you have gone to the lumber store in the last couple of years, you probably received sticker shock. According to the National Association of Home Builders (NAHB), the lumber futures price began climbing at the onset of the COVID-19 pandemic in early 2020.
By the end of May in 2021, the cost of lumber reached $1,500 per thousand board feet ($1,500/mbf). This price is based on the Random Lengths Framing Lumber Composite Price (FLPC), which does not adjust for inflation. The NAHB says that when inflation is figured into the high cost of lumber, the price far exceeds the historical average. The FLPC nearly tripled in late August 2021.
The Effects of High Lumber Prices
These high lumber costs have had a major effect on general public. One major impact of the high cost of lumber is the increased price for a home. In fact, higher lumber prices caused homes to be more than $20,000 higher than normal. It’s not just home buyers that have been feeling the pinch, however.
The high cost of lumber has also been affecting organizations that build homes for low-income families. They simply can’t afford to build new homes for families in need. Some of these organizations, such as Habit for Humanity, also install wheelchair ramps and make general repairs for low-income homeowners. Doing these kinds of repairs and installations has required additional funding.
The high cost of lumber has also affected homeowners who want to remodel their home, add a deck to their backyard, or build a fence. Many homeowners have had to delay these types of projects. Another issue has become the high cost of furniture and any other kind of product that is made from wood.
To avoid paying such high costs, some people have taken matters into their own hands and bought their own sawmill. With their sawmill, they have been able to make their own lumber. Some of these people have created their own sawmill side business.
Some Common Reasons for High Lumber Prices
Sawmill owner or not, many people in need of lumber have been at the mercy of high prices. But why exactly has the cost of lumber been so high? And more importantly, are prices expected to go down anytime soon?
Before answering these questions, here are some reasons for higher lumber prices in general:
Lumber is always in demand and high demand creates high prices.
Deforestation throughout the world is reducing the amount of available wood.
Certain kinds of wood is rarer than others, which drives the price up even more.
Lumber (especially treated lumber) goes through several processing steps, which takes time and costs money.
Lumberyards must factor in shipping costs, which are more expensive the further they are from the logging company.
As stated in the beginning of this article, the COVID-19 pandemic is also to blame for the high cost of lumber.
The Pandemic and High Lumber Prices
Mandatory lockdowns during the height of the pandemic caused a shortage of laborers. There simply were not enough workers to cut down trees and keep lumber stocked. There were also labor shortages at sawmills and factories that processed lumber. The lockdowns also created a desire for people to complete home projects, which further increased the demand for lumber.
A shortage of shipping containers was another reason the pandemic was responsible for the high cost of lumber. The container shortage is a direct result of more people shopping online during the pandemic. According to trade and development experts at the United Nations, the pandemic caused the global e-commerce marked to surpass 26 trillion dollars. The shipping container shortage caused by increased online sales has affected nearly every major industry across the globe, including the lumber industry.
Together, the pandemic and supply chain shortages has resulted in a high rate of inflation. The United States has seen the highest inflation rates since the 1980’s. Inflation has caused the price for three items in particular to rise substantially. These items include gas, meat, and you guessed it, lumber.
Finally, a Decline in Lumber Prices
The Russian invasion of the Ukraine in February of 2022 did nothing to help the already high lumber prices. Around this time, the price of lumber was at $1,452 per thousand board feet. In April of 2022, however, this price had decreased greatly to $829 per thousand board feet. This number marks the lowest price ever for lumber in 2022. At the time this article was published, lumber prices had declined even further to $786.10 per thousand board feet. A rise in mortgage rates and a decline in home renovations were the primary causes for the much lower price of lumber.
Just because prices are low, though, doesn’t mean the end user will see those savings right away. In order to see the lower cost of lumber for themselves, there will need to be a continual decrease in demand and increase in supply. There is also the fact that these low prices might not stick around for long. The lower lumber prices will cause more people to buy lumber, which will drive demand back up. This in turn will increase the price of lumber.
Hopefully, lumber will never be as high as it was during the pandemic. But because of the many factors that affect the price of lumber, there is no guarantee of that never happening again.
