Lumber prices reach their lowest point in 2022

Lumber prices, which skyrocketed at the beginning of the pandemic, fell to $829 per thousand board feet. Now, lumber is sold for 39 percent less compared to last month, when the pricing reached $1,357 per thousand board feet. 

This significant drop in lumber prices comes from rising mortgage rates, growing inflation, and a decline in home renovations, Business Insider reports. In the spring of 2020, many people spent months self-isolating in their homes, and the demand for home renovations increased. However, the furniture industry was not ready to accommodate the spike in demand due to the shortage of various materials and interrupted supply chains. 

Lumber prices grew three times since the beginning of the pandemic and reached an all-time high of $1,500 per thousand board feet in April of 2021. A year later, lumber prices are dropping, and the rising mortgage rates are demotivating American homebuyers. The mortgage application volume is down 41 percent year-over-year, CNBC reports. 

“Mortgage application volume continues to decline due to rapidly rising mortgage rates, as financial markets expect significantly tighter monetary policy in the coming months,” Joel Kan, an MBA economist told CNBC. “As higher rates reduce the incentive to refinance, application volume dropped to its lowest level since the spring of 2019.”

People are waiting for more housing inventory to reach the market and hoping to see a decline in mortgage rates. The demand for home renovation and DIY projects involving lumber has also decreased. The combination of these market trends causes lumber prices to fall. 

However, according to Business Insider, the cost of lumber might rise again. Currently, there is a historic shortage of new homes for sale in the United States. The demand from buyers is still outpacing the current supply. New York City alone needs to build 560,000 additional residential units by 2030 to keep up with its growing population. 

Resources:

“Lumber prices hit 2022 low,” by TDF Staff (The Real Deal, 2022)

“Lumber falls to fresh 2022 lows as spike in mortgage rates cools housing demand and inflation puts dent in home renovations,” by Matthew Fox (Business Insider, 2022)

“Lumber prices are flirting with a crucial level as mortgage rates jump above 5% for first time in years,” by Matthew Fox (Business Insider, 2022)

“Surging interest rates push mortgage demand down more than 40% from a year ago,” by Diana Olick (CNBC, 2022)

“There’s a historic shortage of houses for sale, and Realtor.com predicts more pain for homebuyers this year,” by Tristan Bove (Fortune, 2022)