Yesterday,
lumber futures hit $1,260 per thousand board feet on the Chicago
Mercantile Exchange. If that sounds like a lot, well, it is—an all-time
high.
Lumber prices have soared during the pandemic. Last April, that same order would've cost just $358.
If you think
this doesn't affect you...you probably haven't been house hunting
recently. Astronomical lumber prices have added $24,000 to the cost of a
typical single-family home and $9,000 per apartment, according to the
National Association of Home Builders.
What's going on?
1. The pandemic.
At its outset, Covid forced many mills to temporarily close. When
historically low mortgage rates met a summer wave of homebuying,
renovations, and DIY-ing, producers were unprepared for the demand
surge.
Lumber
prices kept rising during the winter months, so homebuilders and lumber
yards delayed their purchases, hoping prices would come down. Now, with
the busy spring/summer building season ahead, homebuilders and lumber
yards are rushing to get coveted boards, driving prices even higher.
2. The plague. Not the human one. Since the 1990s, warmer winters have caused mountain beetles to spread further across British Columbia, infecting more forests. Their arboreal appetites have diminished harvests.
- Somewhat ironically, in Europe, a different
beetle plague is also getting worse and forcing loggers to cut down
infected trees before the wood becomes unusable. As the US looks for
more supply, Europe has extra to export.
3. Labor. Mills
could theoretically produce more...except some are facing labor
shortages. While the job can include lots of Vitamin D and flannel, low
pay and the difficult, sometimes dangerous work required has pinched
manpower.
Bottom line:
The number of homes for sale continues to sit near a record low. While
that should be a dream for construction businesses, rising prices and
tight inventories for lumber and other building materials have made it
more expensive for builders and, in turn, created an affordability
crisis for buyers.
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