In 2021, lumber prices reached their highest level ever. The move was driven partly by the tremendous strength of the housing market at the time and partly by production and supply chain issues stemming from the pandemic. Now, investors are wondering: will lumber prices go down?
The quadrupling of lumber prices as of Spring 2021 to a record $1,607 per thousand board feet showed the economy was rapidly expanding while inflation was greatly accelerating. The extent and durability of the upturn in inflation became apparent later in 2021.
In recent months, lumber prices have been sinking, suggesting the economy in general and housing in particular may sharply weaken. But on the other hand, prices have rebounded slightly recently to roughly $650 per thousand board feet, indicating the deceleration of America’s economic growth may not be as intense as some have feared.
Will Lumber Prices Go Down?
In a June 17 article, Madison’s Lumber Reporter wrote that lumber prices seemed to be becoming loess volatile. And according to Robert Dietz, chief economist for NAHB, “single-family home building is weakening,” and that trend had reached a turning point.
Taking a more nuanced view was Conrad DeQuadros, senior economic advisor at Brean Capital:
“Housing construction appears to be undergoing a transition, with the sector caught between sharply rising mortgage rates and declining affordability on the one hand and supply-chain constraints on the other that continue to result in rising backlogs of projects.”
Meanwhile, Dustin Jalbert, a senior economist who leads Fastmarkets RISI’s lumber team, agreed at the end of May that the wild swings of lumber prices have likely ended. He predicts prices will ultimately reach $450 to $600, but adds they are unlikely to collapse, since demand for housing is likely to remain decent.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
