Lumber prices spike above $1,000 for the first time since mid-June as hot housing market drives renewed demand

lumber workers housing homebuilding
  • Lumber prices jumped 5% to more than $1,000 for the first time since mid-June on Thursday.
  • The commodity is 41% below its record high, while its up 127% from its recent low.
  • Driving the volatile lumber prices is steady demand for homes combined with dwindling supply.

Lumber prices surged 5% on Thursday to $1,024, jumping back above the $1,000 per thousand board feet level for the first time since mid-June as the commodity experiences heightened volatility amid supply chain issues and steady demand from home builders.

Lumber has experienced a wild 2021. Prices peaked above the $1,700 in May and subsequently fell as much as 74% before bottoming around $452 and rebounding 127% to its current level. The commodity is still down 41% from its recent high, and is only up 12% year-to-date.

The volatility has been driven by various floods in Canada, sustained demand for homes in the US, and a dwindling supply of single family homes.

The total inventory of single family homes for sale in the US has been steadily declining since 2015, when it stood around 1.25 million. Today there are only 350,483 single family homes for sale in the US, according to data from Altos Research. The figure hit a low of 307,000 on April 30.

Driving the demand for homes is record low interest rates, which means low mortgage rates that increases a borrowers purchasing power, and an aging millennial population that is steadily graduating from student debt to mortgage debt.

Where lumber prices go from here is anyone’s guess, but TradeStation’s David Russell expects the volatility to normalize going forward.

“This is the aftershock of that huge earthquake,” Russell told Insider, referring to the spring price rally. “After this, we will see the volatility decrease and things will start to stabilize.”

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