Dive Brief:

• Lumber prices in the U.S. have steadily risen since the COVID-19 outbreak began, due to an increase in demand combined with lumber mill shutdowns.
• The price of lumber for September delivery rose 3.1% to an all-time high of $641.60 per thousand board feet, the Wall Street Journal reported. The new high, a growth of $19 since last month, beats the previous high of $639, which was a result of a brief hike in 2018 from tariffs and forest fires. 
• This spring, the price of lumber futures hit a four-year low as sawmills closed response to the pandemic. When they reopened, the price began to rise, and hasn’t stopped. 

Dive Insight:

Several factors have led to the price jump, according to the Wall Street Journal: 

• An increase in residential construction including do-it-yourself projects like decks.
• Low mortgage rates that spurred residential construction and remodeling.
• The construction of outdoor seating and dining areas for restaurants across the country.
• Lumber mills that were unprepared for the surge in demand.

Another reason for the increase could be attributed to the days and months lost when the mills shut down. The mills could still be catching up and recovering from decreased inventory, according to Mark Dumain, who manages activity on the futures market for LBM Advantage, a lumber buying cooperative.

The impact will mainly affect residential construction, and any change to commercial construction will be minimal, Dumain said.

As commercial construction continued into the pandemic shutdown, the largest impact was a transition from the small amounts of lumber used in some projects to other materials, like steel or other metals, he said. 

In the long term, lumber prices likely won’t dip back. The new home market will continue to see demand, which will inform lumber pricing, even when supply evens out, Dumain said.

Confidence in the National Association of Home Builders/Wells Fargo Housing Market Index for new single-family homes leapt to 78 in August. Any score above 50 is considered a positive level of confidence in the market. 

The current index is the highest it has been in 35 years, after dropping to a score of 30 in April. New home demand continues to be strong, but Dumain said demand could lose momentum if lumber prices continue to rise.