Lumber prices are rising again

A year ago, the rising price of lumber drove the price of construction — especially house construction — way up. The increased prices and supply shortage slowed down construction. Then, in summer 2021, prices fell back to 2019 pre-pandemic levels.

Now, lumber prices, like most commodities, are rising again. They are now about 15% lower than that peak in May 2021, but still about three times their average pre-pandemic price, according to Random Lengths, an industry website.

Business Insider explains:

Lumber prices are continuing to surge amid Russia’s invasion of Ukraine, and traders could soon see even bigger price swings.

Futures have been on a wild ride since the onset of the COVID-19 pandemic, and they soared to a record high of $1,711 per thousand board feet last May. After tumbling through the spring and summer, they have been rebounding and got a fresh jolt from Russia’s war. Since Vladimir Putin ordered troops into Ukraine, prices have jumped 14% to $1,452, putting them just 15% below the all-time peak.

The National Association of Homebuilders estimates that the recent rise has added $18,600 to the price of a newly built home. CNBC points out that even if you rent, you are paying for higher construction costs:

(The high lumber prices) also added nearly $7,300 to the cost of the average new multifamily home, which translates into households paying $67 a month more to rent a new apartment.

There are several reasons behind the inflation, but it’s mostly that sawmills can’t keep up with demand. Sawmill output dropped at the start of the pandemic and while it has recovered some, it is still plagued by labor shortages. Compared to the increase in housing starts, sawmill output is significantly behind.

Other issues inflating lumber prices include ongoing supply chain disruptions, tariffs on Canadian lumber imports and an unusually strong wildfire season in the American West and in British Columbia.

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