The lumber shortage is getting worse.
On Tuesday, the price per thousand board feet of lumber soared to an all-time high of $1,359, according to Random Lengths. Since the onset of the pandemic, the price of lumber has skyrocketed 280%.
For weeks, Fortune has relayed a similar message to readers: The price of lumber is likely to continue posting new all-time highs this spring. To the ire of homebuilders and DIYers alike, that prediction continues to be right. And signs point to this all-time high soon getting topped too. On Tuesday, the July futures contract price per thousand board feet of two-by-fours jumped $63 to $1,481. That squeeze is a result of homebuilders scrambling to get lumber for upcoming summer projects they already have on the books.
“The fact is that we are in the midst of a global supply shortage for all forest products, and pure panic is accelerating the pace of demand. Additional supply cannot and will not be added fast enough to allow for sustained price deceleration in the coming year,” Kyle Little, COO of Sherwood Lumber, told Fortune on Tuesday.
This unprecedented mismatch in lumber supply and demand was ushered in by the pandemic. During the early days of the crisis, sawmills halted production and unloaded inventory. At the same time, bored quarantining Americans rushed to Home Depot and Lowe’s to buy up materials for do-it-yourself projects. But before sawmills could respond to that uptick in demand, another demand spike took place: Recession-induced, record-low interest rates helped spur a housing boom. That boom, which is exacerbated by the largest cohort of millennials starting to hit their peak homebuying years, is drying up existing home inventory and sending buyers in search of new construction. As of March, new housing starts are at its highest level since 2006. And those new homes require lots of softwood lumber.
Why can’t sawmills—enticed by sky-high prices—just start producing more? Well, lumber producers only have so much capacity—and increasing it requires both time and confidence that future sales will remain high. That means the best chance for lumber prices to correct in the short term, Little says, would have to come from slowing demand. However, despite all-time-high lumber prices, neither home construction nor home renovations have showed signs of cooling off.
So for demand to finally slow, lumber prices might need to go even higher.
“We are now in month No. 10 of what we believe to be an 18- to 24-month cycle. Prices are going to trade in a higher than normal range throughout this cycle. Price decline will not happen until there is a slowing of demand. Slowing demand can come in many forms, yet in this cycle affordability will be what many look to as an indicator of lumber’s inflection point,” Little told Fortune.
Our mission to make business better is fueled by readers like you. To enjoy unlimited access to our journalism, subscribe today.
