Builders Can’t Expect Lower Lumber Prices

Credit: AZ Big Media

After hitting a record high of $1,670.50 for 1,000 board feet in May, lumber futures contracts had dropped 68 percent to $536 by July 16th. So when will those lower prices start to show up in the market at large?

When the pandemic swung into full force last year, U.S. lumber companies scaled back production to avoid having to sit on inventory during a downturn. Supply was also negatively impacted through ongoing lumber trade disputes between the U.S. and Canada, as well as Canada’s more strict approach in managing COVID-19 precautions.

However, demand during the crisis surged, as homebound Americans began to undertake home improvement projects and the general construction industry still maintained high production and project volumes.

Because of wild price swings in futures contracts, suppliers have a hard time providing accurate estimates for builders. According to Tim Morris, associate broker with HomeSmart, prices have fluctuated as much as $25K in some three-month periods. He noted an April 2020 project in Casa Grande cost less than $32K for framing, with the same job today costing more than $80K.

Many experts agree the fluctuations in futures prices really only affect future traders, and that the production market should not expect to see any significant relief unless there is a major decrease in demand or increase in supply, neither of which are expected in the near term. (Source)

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