Lumber was one of the first commodities to see a price spike that signaled the inflation that has marked this period of the COVID economic recovery. In May, soaring demand sent prices past $1,700 per thousand board feet. Over the summer, production started to meet demand, and by November prices had dropped to less than a third of what they had been six months before. But as has been so often the case over the past two years, things have changed in a hurry.
Demand is still high, as new home construction was up 12% in November. Lennar, the second-biggest home builder in the U.S., expects new home construction in 2022 to be 12% higher than this year. Supply, however, has taken a big hit. Flooding in British Columbia, the Canadian province which supplies about half of the softwood lumber the U.S. uses, has shut down exports temporarily.
This combination of factors has sent lumber prices back above $1,000 per thousand board feet, with costs hitting $1,100, double what they were a month ago. As a result, the construction of many new homes has been delayed, and those who must wait longer for their houses to be built also find themselves facing a larger bill when the lumber arrives.
“Existing projects are taking even longer to complete, a result of labor and product shortages. There is no sign that these bottlenecks are easing,” Jeffries economists Aneta Markowska and Thomas Simons wrote.
With interest rates on home loans set to rise in the coming year as the Federal Reserve eases its pandemic measures, buyers are going to have pay more for that roof over their heads.